Axios China

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Welcome back to Axios China. I have some exciting news to share. I'm writing from Taiwan's capital city Taipei, where I am now permanently based as Axios' first staff reporter in the region.

  • Today's newsletter, written from the comfort of my quarantine hotel, explains why Axios is deepening its Asia coverage. We're also looking at the China competition bill stuck in Congress, the new Australian government's China posture, and lots more.
  • What topics related to China and the Indo-Pacific would you like to read? Send suggestions to [email protected], or just hit reply.

Today's newsletter is 1,414 words, a 5½-minute read.

1 big thing: Axios China moves to Asia

Illustration of the Axios "A" looking over a globe showing Asia.
Illustration: Aïda Amer/Axios

Axios is now on the ground covering U.S.-China competition in the Indo-Pacific, a region the U.S. has identified as a "priority theater."

Why it matters: The pace of news coming out of the Indo-Pacific is only going to accelerate as Beijing hopes to push the U.S. out of the region and establish its own authoritarian sphere of influence.

What's happening: As China's economic and military dominance in the region grows, neighboring countries are weighing new alliances, putting aside old hostilities, and assessing how they can make the U.S.-China rivalry work to their advantage.

  • Japan has emerged as a forceful advocate for closer regional partnership with the U.S., and South Korea under a new president has signaled a willingness to downplay historical grievances against Tokyo in order to form a tighter front against Beijing.
  • Taiwan seeks to reform its military as China's threat of unification by force grows more tangible.
  • India, locked in an occasionally deadly border dispute with China, is cracking down on Chinese tech companies.

Other countries are less concerned about Beijing and more concerned about the superpower rivalry itself.

  • Southeast Asian nations don't want to choose between China and the U.S., but they increasingly feel like they're being pushed to do just that.
  • Pacific Island nations are now being heavily courted by the U.S. and China, which both hope to secure control over strategic waterways.

From Taipei, I'll also cover developments inside China as President Xi Jinping prepares for a precedent-defying third term.

  • China's economy has taken a beating as zero-COVID policies have shut down key growth engines like the city of Shanghai and curtailed cross-border trade.
  • China is also home to an innovative but beleaguered tech scene — and an emerging high-tech surveillance state.

It won't be all geopolitics all the time.

  • Axios China readers will continue to find a mix of topics in each newsletter, including China's economy, literature, cinema, sports and cuisine, as well as new books worth your time.

Between the lines: In recent weeks as I've told friends I'm moving, the most frequent question I'm asked is, "Why Taiwan?"

  • The U.S. and China don't agree on very much when it comes to Taiwan, but here's a point neither side would argue with: "The Taiwan issue is the biggest tinderbox between China and the United States," Chinese ambassador to the U.S. Qin Gang said in January.
  • Taiwan is a fascinating place in its own right. Home to around 24 million people, it's the only Chinese-speaking democracy in the world. It's also one of the most progressive countries in Asia, with legal same-sex marriage and a female president who champions gender equality.
  • Beijing also would have been a good home base, but I appear to be banned from China.

2. Senate to vote on limited China competition bill

Sen. Majority Leader Chuck Schumer (D-NY) looks on during a news conference after the Senate luncheons in the U.S. Capitol on June 22, 2022 in Washington, DC.
Sen. Chuck Schumer. Photo: Brandon Bell/Getty Images

Senate Majority Leader Chuck Schumer (D-N.Y.) will hold a vote today on a narrow version of the Senate's expansive China competitiveness bill, focusing solely on emergency funding and a new tax credit for the semiconductor industry, Axios' Alayna Trayne reports.

Why it matters: Schumer is cutting bait — at least for now — on the broader U.S. Innovation and Competitiveness Act (USICA), with a compromise on the sweeping package becoming increasingly unlikely before Congress breaks for its August recess.

  • "We need to move quickly," Schumer said on the Senate floor on Monday.
  • The billions in funding for the semiconductor industry is a crucial and immediate priority for the Biden administration to help combat inflation and deal with supply chain issues.
  • The White House urged Congress last week to work within the realm of what's possible and focus on passing a limited measure now.

Between the lines: The move to slice off CHIPS funding (Creating Helpful Incentives to Produce Semiconductors) comes after Senate Minority Leader Mitch McConnell (R-Ky.) announced his intent to hold USICA hostage if Democrats simultaneously pursued a path toward reviving the ambitious Build Back Better package.

  • Schumer and Sen. Joe Manchin (D-W.Va.) have been making progress on passing a scaled-down version of the package through a reconciliation process that would only require Democratic votes to pass.

Go deeper: Democrats weigh jamming McConnell on China bill

3. Catch up quick

1. House Speaker Nancy Pelosi plans to visit Taiwan in August after a previous trip was canceled when she tested positive for COVID, the Financial Times reports.

2. Nearly 1 in 5 Chinese young people are unemployed, according to new government data, Grid News reports.

3. Philippine President Ferdinand Marcos Jr. is pushing to secure Chinese loans on three major infrastructure projects, Reuters reports.

4. China has invited top European leaders to meet with Xi Jinping in November in Beijing, the South China Morning Post reports.

5. Treasury Secretary Janet Yellen urged U.S. allies to diversify key supply chains away from China. Go deeper.

4. Australia's defense minister warns of China's military buildup

Australian Defense Minister Richard Marles
Richard Marles. Photo: Roslan Rahman/AFP via Getty Images

Australia's Defense Minister Richard Marles warned of a "military buildup occurring at a rate unseen since World War II" and vowed to strengthen Australian defense during a speech last week in Washington, D.C.

Why it matters: The remarks laid out a vision for Australia's leading role in Indo-Pacific security. They also signaled that Australia's new Labor government will maintain a close security partnership with the U.S. as well as the tough China policies of the two previous governments.

  • Marles became defense minister and deputy prime minister in May when elections swept the Labor party into power, ending nine years of conservative coalition rule.

The big picture: China has sought to establish a foothold in the Pacific Islands region, where Australia has traditionally had great influence.

  • The Solomon Islands signed a security pact with China in April, alarming Canberra and Washington.

What he's saying: "For the first time in decades, we are thinking hard about the security of our strategic geography, the viability of our trade and supply routes, and above all the preservation of an inclusive regional order founded on rules agreed by all, not the coercive capabilities of a few," Marles said.

  • In his speech at the Center for Strategic and International Studies in Washington, the minister also warned of growing challenges to regional and global security, including cyberthreats, supply chain disruptions, the rise of great power competition, and the use of force to push territorial claims.
  • Marles said his "first priority" will be the trilateral security pact AUKUS, announced in September 2021, which will see the transfer of nuclear submarine and other defense technology from the U.S. and the U.K. to Australia.

Between the lines: Marles' speech didn't mention China by name, though he did in later remarks, as it focused on making a positive case for democratic partnerships rather than publicly lambasting Beijing.

  • "There have been a lot of questions here in Washington on where exactly the Labor government would land on its approach toward Beijing and on a variety of defense policies, including AUKUS," Charles Edel, Australia chair at CSIS, told Axios.
  • "Marles' remarks emphasized that the new Australian government sees China as a destabilizing regional presence and believes its capabilities, sovereignty and security are all enhanced through its alliance with the United States."

5. What I'm reading

Home(grown) computer: Shutting out Windows (The Wire China)

  • "Microsoft Windows has long enjoyed dominance in the desktop operating system market in China — and Beijing has long wanted that to change."
  • "Now after years of attempting to develop an alternative, the Chinese government is shifting tack. Its latest effort to come up with a viable indigenous rival to Windows — announced officially in June and known as the openKylin project — is looking to draw on expertise from a so-called 'root community' of both state and non-state backed companies, individual developers, and research institutions."

Double standard: Biden’s Middle East policy contradicts his China policy (The Diplomat)

  • "On this trip, Biden 'closed the Saudi’s prince’s pariah era' with an already infamous fist bump, which will not go unnoticed by both Indo-Pacific allies and swing states. ... Developing countries could now readily justify a cold, calculated approach to working with China. Biden’s 'values' talk is unlikely to convince too many of them — if it ever did."

6. 1 photo to go: The real reason I moved to Taiwan

a bowl of Presidential Beef Noodles at the Niu Ba Ba restaurant in Taipei.
A bowl of Presidential Beef Noodles at the Niu Ba Ba restaurant in Taipei. Photo: Sam Yeh/AFP via Getty Images

The food. It's the food.

  • Taiwan is a well-known foodie paradise. Its night market food scene is legendary.
  • Beloved soup dumpling chain Din Tai Feng, pineapple cakes and that trendy bubble tea you love — all Taiwanese.

Taiwanese cuisine developed in tandem with the island's history as the crossroads of East Asia.

  • Historical migration from provinces across China brought the best of mainland cuisine, while Japanese rule in the late 19th and early 20th centuries introduced new ingredients and cooking methods.
  • The traditions of Aboriginal peoples in Taiwan, as well as local ingredients and customs, also influenced the food landscape.

A big thank you to Laurin-Whitney Gottbrath, David Nather and Aja Whitaker-Moore for edits, Sheryl Miller for copy edits, and Aïda Amer for visuals.