Sep 7, 2018

Axios China

Today is the 5th anniversary of Chinese President Xi Jinping's announcement of his vision for the Belt & Road Initiative.

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1 big thing: Next rough wave of tariffs looming

Illustration: Rebecca Zisser/Axios

President Trump plans to evaluate public comments before deciding on the latest proposed tariffs on Chinese imports, according to White House economic adviser Larry Kudlow this morning, dimming speculation that they could announce the next round as early as today.

Driving the news: The comment period for the next round of U.S. tariffs ended Thursday. Per Reuters:

The U.S. Trade Representative’s office collected 5,914 individual comments on the proposed tariffs before a public comment period ended late on Thursday night.
“The president himself, we will evaluate the comments and we will make a decision regarding the $200 billion,” Kudlow said on Bloomberg Television. “We’ll make a decision on the volume, on the rate, on the timing, I don’t want to get ahead of that curve, it’s out there.”

There's still no clear pathway to resolving the disputes. Bob Davis and Lingling Wei of the Wall Street Journal report that the U.S. may be counting on deals with Japan, EU, Mexico and Canada to provide more leverage:

Relaxing trade tensions with Mexico and Canada, plus a preliminary trade agreement with the European Union, have made it easier to forge a multilateral front to oppose Chinese trade practices. The U.S., EU and Japan have already held meetings on such a strategy.
A trade detente also blunts criticism from Congress and U.S. industry that the administration has erred by picking fights with friendly countries at the same time as it battles with China. Additionally, officials say, it helps recruit allies to stop Chinese exporters from skirting U.S. tariffs by shipping goods to third countries, which then send the goods to the U.S., say officials.

On the other side: Chinese officials continue to give no public indication they will make the kinds of structural concessions the Trump administration is demanding.

  • The latest issue of Qiushi, an authoritative theoretical journal under the Communist Party Central Committee, has a commentary defending China's economic system and arguing that America's real goal in launching the trade war is to thwart China's rise.

My thought bubble: There's a school of thought that the increasingly repetitive messaging (that America’s real goal is China containment) is just propaganda posturing for negotiating leverage. I think the fact that this line keeps appearing in the most authoritative publications for Communist Party members and officials, not foreign audiences, likely undermines that view.

The bottom line: Maybe the Chinese will eventually cave, but the White House should be preparing for a much longer and more protracted trade war.

2. Nauru stands up to China

Nauru President Baron Waqa at a press conference before the start of the forum. Photo: Mike Leyral/AFP/Getty Images

Nauru, an island nation that has formal diplomatic relations with Taiwan, hosted the Forty-Ninth Pacific Islands Forum this week.

The details: First, the country refused to stamp the official diplomatic passports of the PRC diplomats. Then Nauru President Baron Waqa prevented the PRC representative from speaking out of turn at the forum, leading to the Chinese diplomat walking out. ABC News Australia reports:

Nauru's President Baron Waqa, chairing the forum, said the delegate "created a big fuss" and held up the meeting for several minutes after other forum leaders were given priority to speak.

What we're hearing: In an interview (video) after the forum, Waqa did not mince words when speaking about the PRC representative. Here are some excerpts, per RNZ:

"His behaviour in front of our leaders, ministers and officials was uncalled for. ... He disrespected the Pacific and its leaders and our dialogue partners who had come to join us in our own meeting."
"Look at him, he is a nobody. He is not even a minister and demanding to be recognised and to speak before the Prime Minister of Tuvalu. Is he crazy?"
"We will not only ask for a formal apology, we will actually take it up to the United Nations. Not only that, I will mention it at the UN and every international meeting to raise our concerns about this incident."

Why it matters: It's rare to see any foreign leader take such a strong stance towards Beijing and its growing diplomatic assertiveness. The South Pacific is a focus for Beijing as part of its efforts to pick off Taiwan's few remaining diplomatic allies. Importantly, it's also because the People's Liberation Army is looking for ways to extend beyond the first island chain into the broader Pacific Ocean.

Go deeper: The Australian reported Friday that Australia "successfully blocked China from funding a major ­regional military base in Fiji, a move that reveals intensifying concern in Canberra over strategic competition in the South Pacific region."

3. Top U.S. spy official talks PRC espionage

China is absolutely the largest threat to U.S. security, according to William Evanina, director of the National Counterintelligence and Security Center. He recently joined Michael Morell, former acting CIA director, on the "Intelligence Matters" podcast to talk about foreign espionage efforts in America, especially that of China.

Some key excerpts:

"China is number one. So, existentially, long term, they're the largest threat to our national security, bar none; so, it's not even close. ... [T]heir processes are more economic-based to be the number one economic power in the world — to not have a global equal like us, but to overtake us."
"[T]hey look at that from semiconductors, supercomputing, quantum technology that the persistent theft of our intellectual property and trade secrets, which is critical, the human-enabled cyber capabilities they have from insider threats. ... [The FBI] just made an arrest two weeks ago for General Electric."
"The F.B.I. has arrested double-digit individuals in the last year or so all for spying on behalf of China."
"They have significant number of Ph.D.-plus students that are here working our most sensitive technologies. So, they have the numbers, the resources, they have the will and the intent, the capabilities are out of this world with respect to cyber, and ... whole-government mindset how to take from us what they need."

Go deeper: Listen to the podcast.

Why it matters: The trade issues with China are just a part of the much deeper and intensifying competition between the U.S. and China. Even if some kind of deal is struck, the overall the trajectory of the Sino-U.S. relationship is unlikely to change.

4. China-Africa forum strengthens ties

South African President Cyril Ramaphosa (l) and Alibaba chairman Jack Ma (r) at Alibaba headquarters one day after the conclusion of 2018 FOCAC. Photo: VCG/VCG via Getty Images

Xi and his colleagues spent the last week feting the leaders from 53 of 54 African nations at the Forum of China-Africa Cooperation (FOCAC) summit.

What's happening: Xi promised another $60 billion in financing to Africa along with eight initiatives for PRC-Africa cooperation. The $60 billion amount was the same as promised in 2015, but with changes to the composition, as Yun Sun wrote in Brookings Institution note:

[J]udging from the volume and composition of China’s 2018 FOCAC financial pledges to Africa, China’s commitment remains strong, but appears to be more cautious and calculating than its pledges from the past summit.
The concessional side of Chinese financing is being moderated, while China has grown visibly more focused on the commercial and viability aspects. From the traditional model of “resources for infrastructure,” China appears to be morphing toward the next stage: equity investment by a more diverse group of investors supported by state development finance.
Meanwhile, Africa still has major catch-up to do to attract more Chinese investment and to diversify its trade relations with China.

What we're hearing: South African President Cyril Ramaphosa spoke to reporters after the summit, telling them China's relationship with Africa has "now entered a golden age," according to Caixin. Per the report:

“There’s no new colonialism,” Ramaphosa told reporters on Tuesday, echoing Chinese President Xi Jinping, who said on the first day of the summit on Monday that China’s investment in Africa came with no political strings attached.
“We were all engaged in struggle against the colonialists from the Northern Hemisphere,” he said, referring to the long-standing relationship between South Africa’s ruling African National Congress party and the Communist Party of China.

Quick take: Much of Western media coverage about the summit has been critical, but we shouldn't forget that the African leaders have agency. Plus, there doesn't seem to be a better offer/plan for them coming from the West.

5. Trump's Taiwan policy facing challenges

Josh Rogin of the Washington Post wrote an opinion piece on Thursday that Trump is failing to counter China’s diplomatic assault on Taiwan:

The paradox of the Trump administration’s Taiwan approach is that, despite the presence of pro-Taiwan officials throughout the government, the actual policy has moved only incrementally, well short of what would be a proportional response to Beijing’s increasingly aggressive diplomatic, economic and military campaign against Taiwan...
The United States’ Taiwan policy is hampered by two challenges: the lack of a comprehensive strategy and the personal resistance of President Trump. Convinced his personal friendship with Chinese President Xi Jinping will yield results for the United States on either trade or North Korea, Trump has resisted more assertive moves to bolster the U.S.-Taiwan relationship, several officials said.

Why it matters: There are officials in the administration who want to move the U.S. much closer to Taiwan, but President Trump really seems to have no strong feeling about Taiwan. That means Taiwan will be very careful about what it asks for and accepts from the U.S., as they can not have confidence the President will not flip flop after a chat with Xi Jinping.

6. "I’d Like to Build the World a Road”

China's Communist Party paper People's Daily created a music video to commemorate the 5th anniversary of Xi's articulation of the vision for the Belt & Road Initiative. The song is modified from the old Coca Cola advertisement jingle "I’d Like to Buy the World a Coke".

Some of the lyrics, courtesy of Quartz:

I’d like to teach the world to sing, in perfect harmony
I’d like to hold it in my arms, and with my family
I’d like to tell the world a truth, and keep it in my heart 
Community of shared future for mankind’s coming true
It’s the Belt and Road, what the world wants today
That’s the hope we will say, with the belt and road 
It’s the Belt and Road, won’t you hear what we say
What the world needs today, it’s the real thing

Watch it here on Tencent Video.

Go deeper: Read the CSIS brief China's Belt and Road Is Full Of Holes

7. Worthy of your time

Peak Xi Jinping? — ChinaFile

#MeToo on the Chinese Blogosphere: Justice, Victimization and Intellectual Revolt — Chublic Opinion

Huawei unveils world's most advanced chip to counter AppleNikkei Asian Review

Ambitious Banker’s ‘Shadow Banking’ Scheme Leaves ICBC on Hook for Billions — Caixin

China’s Lessons for Fighting Fake News — Foreign Policy

Survey of more than 500 China scholars provides data on how frequently they experience Chinese state repression — Inside Higher Education

Engine boost for China’s J-15 fighter jets as Beijing tries to build up navy — South China Morning Post

Xi's upcoming visit to Russia to inject new impetus to ties — Xinhua

Chinese Embassies are Becoming Increasingly Assertive: the Case of Sweden – Taiwan Sentinel

China Reserves Steady as Yuan Declines Fail to Trigger Outflows — Bloomberg

China inquisitors in dock over death of Hong Kong businessman — Financial Times

Uyghur Poetry in Translation: Perhat Tursun’s “Elegy” — Fairbank Center

This week's issues of my Sinocism China Newsletter

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