Tremors & earthquakes: Latest China news on shifting geopolitical trends -- China Boss update 9.24.21
Update
Tremors & earthquakes: Latest China news on shifting geopolitical trends
I am always amazed at how quickly things on the post-Covid geopolitical map are changing for China. Its international image appears to be heading south as surveys show that citizens in developed countries no longer have the same enthusiasm for the Chinese leadership they once did, especially after details of the human rights horrors taking place in Xinjiang were revealed.
As a result, the PRC’s soft power, which I would argue is its greatest strength, is weakening. Beijing’s disinformation campaigns, wolf warrior diplomacy, hostage taking, economic coercion in trade relations and other such nonsense, of course, don’t help. Earlier this year, a few central and eastern European (CEE) countries snubbed President Xi by sending junior diplomats to greet him at the “17+1” initiative set up by Beijing. Others - like Poland, Czech Republic, Lithuania, and Slovakia - have even been “warming to Taiwan” (see Financial Times report “Central and eastern Europe turn to Taiwan as China relations cool”). A similar show of “disrespect” to the world’s largest emerging market would have been unthinkable a few years ago.
Last week’s China news was packed with analysis on analogous and potentially earthshaking geopolitical events. I divided the 12 recommended reports below into two categories: “Tremors” - in which I included news of small but consequential developments that could turn into something big,” and “Earthquakes” which I consider to be indicative of major shifts responsible for new fault lines in the direction of trade, supply chains and, even, military power.
Tremors.
China's high-tech push seeks to reassert global factory dominance (Kevin Yao, Reuters)
Read to see how President Xi has turned away from China's 2016-2020 five-year plan which focused on services to create jobs. China is now going “all in” on advanced manufacturing to "reassert its global factory dominance.” The development can be seen as a “tremor” because the jury’s still out on whether President Xi can accomplish tech supremacy or if he just bet China’s farm on a lost cause given the host of challenges.
China wealth plans threaten European luxury stocks' post-COVID boom (Joice Alves, Reuters)
Read to learn how “China's stuttering economic recovery and plans to redistribute wealth threaten to derail Europe's booming luxury sector.” This is a geopolitical tremor for now, but if President Xi kills the China business of Europe’s biggest luxury houses, he’ll alienate some of his most powerful allies that help keep Brussels facing east rather than west.
The Sharp U.S. Pivot to Asia Is Throwing Europe Off Balance (Steven Erlanger, New York Times)
Read to see how Aukus - the new U.S. alliance with Australia and Britain against China - is bringing Europe "closer" to something its been trying to avoid: Having to pick sides. The article is particularly insightful for understanding how France relies on the U.S. to protect its unique geopolitical interests.
‘More of China, less of America’: how superpower fight is squeezing the Gulf (Andrew England and Simeon Kerr, Financial Times)
Read for some interesting analysis on a topic seldom covered in mainstream news: China’s increasing influence in the Middle East. The UAE takes its temporary seat on the UN Security Council in January 2022, making the struggle to balance relations with, both, the U.S. and China all the more delicate.
TikTok faces GDPR probe over children’s data and China transfers (Hannah Murphy, Financial Times)
Read for news on Ireland’s investigations into TikTok “over its handling of children’s data and alleged transfer of user information to China.” The EU’s General Data Protection Regulation (GDPR) is taken very seriously in Europe - not quite on par with environmental protection, but pretty close. A finding of violation by the Irish data commissioner would send shock-waves across the Continent and is likely to result in heavier data protection scrutiny for all Chinese firms.
Earthquakes.
The Evergrande crisis and China's regulatory crackdowns are shaking the notion that China is an investable market, says Mohamed El-Erian (Carla Mozée, Business Insider)
Read to see how the “Evergrande crisis and China's regulatory crackdowns are shaking the notion that China is an investable market.” Huge. Like a 6 or 7 on the Richter scale.
Going nuclear: the secret submarine deal to challenge China (Michael Safi and Dan Sabbagh, podcast, The Guardian)
Listen to Michael Safi and Dan Sabbagh discuss how “the new military pact between Australia, the UK and the US [Aukus] could transform international relations for a generation.” Aukus is an earthquake for Beijing’s energy security - Australia is a key partner - and is expected to cause an arms race in the region that would undermine China’s ability to control the South China Sea. A great read on the topic is “Why Aukus is a game changer in the Indo-Pacific” in the Japan Times (paywall), see my LI post excerpt here.
Central and eastern Europe turn to Taiwan as China relations cool (Kathrin Hille and Richard Milne, Financial Times)
Read to see how the central and eastern European countries of Czech Republic, Poland, Lithuania, Estonia and Slovakia are cooling on China and warming to Taiwan. This shift has enormous implications for the EU's relationship with China, as well as its transatlantic partnership with the U.S. as all five nations are EU member states and part of NATO.
Throw away your Chinese phones, Lithuania defense minister tells citizens (Liv Klingert, Politico)
Read to see why the Lithuanian government told its citizens to "throw away" their Chinese phones. Another incredible data privacy China precedent that is certain to be noticed elsewhere in Europe.
Japan's defense minister draws red line in island dispute with China (Brad Lendon and Blake Essig, CNN)
Read this CNN interview with the Japanese defense minister so that it will come as no surprise if tensions with China escalate - not in the Taiwan Straits - but near the Senkaku Islands. And no, I don’t think he’s bluffing. Japan’s proverbial “line in the sand” is a powerful jolt.
Japan urges Europe to speak out against China’s military expansion (Helen Davidson, The Guardian)
Read The Guardian’s interview with the Japanese defense minister to get a sense of how urgent Japan feels its security situation has become. In the past, it was rare to hear Japanese officials openly criticize China in such a frank and broad manner.
America’s China Strategy Is Working (Michael Schuman, The Atlantic)
Read for Michael Schuman's assessment of what he thinks has been America's most effective method of countering China - exposure of its human-rights record in Xinjiang. Schuman writes that the "tension between the lure of China’s riches and revulsion over its authoritarian practices is escalating sharply, raising the costs, risks, and hurdles involved in doing business there,” and that the ensuing "complexity of navigating this expanding minefield has the potential to disentangle China’s economy from that of the United States and other countries to a degree that tariffs, trade wars, and diplomatic temper tantrums have not."
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Whew, that was lot to take in. Hope you got something from it, I certainly did.
In case you missed my “Hunger Games” parody image featured in last week’s newsletter, I proudly display it again. H/t to Bloomberg’s Shuli Ren for making the comparison - “Why Evergrande’s Endgame will be like the Hunger Games.” So fitting.
Have a great weekend.