March 08, 2022
Welcome back to Axios China. With the world focused on Ukraine, I'm taking a close look at how China fits in, with a tour of Beijing's censorship of the war, Russia's turn toward the yuan, and lots more.
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- 🎧 Season 4 of Axios' podcast "How it Happened" on the slow-motion path to Russia's invasion of Ukraine is now available for download. Click here.
Today's newsletter is 1,513 words, a 6-minute read.
1 big thing: Beijing rewrites the Ukraine narrative
The Chinese government is scrubbing the country’s media of sympathetic or accurate coverage of Ukraine and systematically amplifying pro-Putin talking points about Russia's invasion of Ukraine.
Why it matters: China’s wide use of its propaganda and censorship muscle helps insulate Beijing from a domestic backlash against its support for Putin — and leaves its citizens with an airbrushed, false version of events, similar to what’s seen in Putin’s state-controlled Russia.
What's happening: Chinese media outlets were told to avoid posting "anything unfavorable to Russia or pro-Western" on their social media accounts and to only use hashtags started by Chinese state media outlets, according to a leaked censorship directive.
- Online comments expressing sympathy for Ukraine have been deleted; even the anti-war speech given by the International Paralympic Committee president during the opening ceremony was censored in Chinese television broadcasts.
- Pro-Putin social media posts on Chinese social media were allowed to proliferate, as were posts blaming the U.S. and NATO for the conflict.
- Chinese state media have widely aggregated content from Russian outlets including RT, a Russian state-controlled international broadcaster.
But the Chinese government made a miscalculation in the early days of Russia's invasion, according to a new analysis published by Doublethink Lab, a Taiwan-based organization that researches online disinformation — suggesting that Beijing underestimated Europe's resolve.
- Initial state-backed narratives emphasized the unreliability of the West, with Chinese state media pushing the headline “Ukrainian president says the West has given up on Ukraine" and similar stories.
- Other Beijing-linked posts extended this narrative to Taiwan, drawing on Ukraine's plight to cast doubt on future U.S. support for Taiwan.
"They tried to depict the U.S., the West and NATO as not trustworthy and people in Taiwan as delusional to think the U.S. will protect Taiwan at all," Doublethink Lab CEO Min Hsuan Wu told Axios.
- "But that faded away after the strong sanctions and united front from European countries and NATO allies," said Wu, a reaction that cast the West as a reliable partner.
- Chinese state media and related social media posts then turned to blaming the U.S. for the war and to spreading Russian government talking points.
Yes, but: Censorship means that opposing viewpoints are muted, making it seem like anti-West, pro-Russia sentiment is more ubiquitous among Chinese people than may actually be the case.
- "What we are documenting here is not how all Chinese people themselves think," Wu emphasized. "This is censorship and information control."
2. Russia turns to the renminbi
Russian companies and banks are turning to China's currency, the yuan (also known as the renminbi), as the doors to the U.S. dollar-based global financial system slam shut due to sanctions.
Why it matters: The sanctions on Russia "incrementally help internationalize the renminbi," James Fok, author of the book "Financial Cold War: A View of Sino-US Relations from the Financial Markets," told Axios.
- "But that doesn't mean the renminbi is going to suddenly start rivaling the dollar in any meaningful way. In order for it to do so, you have a lot of other pieces that have to fall into place," Fok said.
What's happening: Russian companies have rushed to Chinese banks to inquire about opening accounts, Reuters reports.
- FESCO Transportation Group, a Russian logistics company, told customers last week that it would accept payment in yuan.
- After Visa and Mastercard suspended their operations in Russia, some Russian banks are considering switching to UnionPay, China's state-owned card payments system.
Zoom out: China's leaders chafe at U.S. financial hegemony and have pursued policies aimed at internationalizing the yuan, such as successfully advocating for its inclusion in the International Monetary Fund's special drawing rights basket in 2016, an important international reserve.
Yes, but: China's push toward internationalization of the yuan over the past decade has been half-hearted at best, with less than 2% of global payments using yuan.
- Beijing is reluctant to relinquish control over the currency, and it does not want to bear the potential ill effects of having a globally dominant currency.
- The government's tight capital controls make it difficult to move assets out of China, which discourages international yuan transactions.
State of play: Despite Russian interest, Chinese banks are wary of the risk of U.S. secondary sanctions, meaning the U.S. government's ability to penalize non-U.S. companies that do business with sanctioned entities.
What to watch: The sanctions "will certainly mean that the Russians will end up holding more renminbi," Fok said.
- But for other countries to be willing to conduct more transactions in yuan, the Chinese government would need to relax capital controls and improve rule of law — or a splintering of the global financial system would have to occur to make the yuan seem more appealing in comparison.
- "A lot of the pieces on the chessboard have yet to be moved," Fok said. "More likely, it will play out over a period of decades."
3. Catch up quick
1. China's foreign minister warned the U.S. against creating an "Indo-Pacific version of NATO," AP reports.
2. A Chinese national was shot and injured while trying to flee Ukraine, China's Ministry of Foreign Affairs said, Reuters reports.
3. China announced an economic growth target of 5.5% for the coming year, the New York Times reports.
4. Secretary of State Antony Blinken spoke with his Chinese counterpart Wang Yi about Ukraine, Reuters reports.
4. Russia's crackdown on free press and speech intensifies
New efforts by the Kremlin to bully the press and silence dissent are forcing independent media and social networks out of the country, Axios' Sara Fischer writes.
Why it matters: Within a period of weeks, Russia's press and speech environment has become even more restrictive than China's.
- Russians are losing access to independent reporting about the war, while the West loses insight into an already isolated leader.
Driving the news: Bloomberg and the BBC suspended operations in Russia, while CNN, CBS and ABC ceased broadcasting in the country after Russian lawmakers approved new legislation Friday that threatens to imprison journalists and individuals for up to 15 years if they publish what Moscow deems to be "fake" information about Russia's invasion of Ukraine.
The big picture: Before invading Ukraine, Russia was already following in China's footsteps, limiting access to social media sites, restricting journalist access and blocking key websites.
- But compared to China, those measures were limited, and Russians still had relatively open access to global information highways if they wanted to seek them out.
- Now almost overnight, the Russian government has created an information control regime that surpasses Beijing's in some respects.
Russia's communications regulator Roskomnadzor said Friday it blocked the websites of several outlets, including U.S. government-funded Voice of America and Radio Free Europe/Radio Liberty, for spreading what it called fake news on the "special operation in Ukraine."
- German broadcaster Deutsche Welle and Meduza, an independent Russian publication based in Latvia, were also blocked.
Inside Russia, independent news agencies are being yanked off the air, forcing journalists to flee the country.
Russia also blocked Facebook entirely Friday, after partially restricting the social network last week.
- Tech companies have been limiting the reach of Russian state media in response to Western government requests. Many firms have restricted Russian state media from buying ads globally. Google and Apple have removed apps for Russian state-controlled outlets RT and Sputnik from their app stores globally.
What to watch: If there will be an off-ramp at some point. Will Moscow maintain these draconian restrictions indefinitely or will some Western media outlets be allowed back in the country if the Ukraine crisis resolves?
5. What I'm reading
Whole new world: We need a more realistic strategy for the post-Cold War era (Washington Post)
- "For the first time since World War II, the United States faces powerful, aggressive adversaries in Europe and Asia seeking to recover past glory along with claimed territories and spheres of influence," writes former U.S. Defense Secretary Robert Gates.
- "We cannot pretend any longer that a national security focus primarily on China will protect our political, economic and security interests."
Putin and Xi's imperium of grievance (Project Syndicate)
- "Until the Russian invasion, it was still possible to believe that a full Western 'decoupling' from China and Russia was both unlikely and unwise," writes Asia Society's Orville Schell.
- "The narrative of victimization that is psychologically fueling both countries’ nationalism with reservoirs of resentment is simply too powerful to be nullified by the niceties of international law."
Collateral damage: Stranded Chinese run gauntlet in Ukraine (AFP)
- A 25-year-old Chinese national surnamed Cao, "one of about 6,000 Chinese nationals who were in Ukraine when war broke out, described feeling helpless and abandoned after essentially being told by China's Embassy in Ukraine to fend for himself."
- "Other Chinese have claimed they faced hostility and even physical attacks from Ukrainians angry over China's reluctance to condemn Russia, and have called for Chinese Internet users to avoid inflammatory posts."
6. 1 photo thing: Dubliners protest China
P.S. An Axios China reader recommended "Secondhand Time: The Last of the Soviets" by Svetlana Alexievich, so I'm adding it to my Russia reading list.
- "It is an oral history so the audio version works really well," the newsletter reader says.