May 17, 2022
Welcome back to Axios China. Today we're looking at the evolution of France's China ties, Chinese investment in Latin America, an economic downturn, and lots more.
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Today's newsletter is 1,802 words, a 7-minute read.
1 big thing: France navigates tricky China challenges
Top French officials rarely lambast China publicly, but in recent years, France has come to see one of its most important economic partners as a competitor, a security concern and, in some cases, a threat.
- Why it matters: The Biden administration is trying to build trans-Atlantic consensus on a more assertive agenda to counter Beijing's growing power. Paris, in some ways, doesn't need persuading.
What's happening: In the past few years, France has undergone a quiet but clear evolution in its views on China across industry, national security and popular opinion.
Industry and economy: The Chinese market once paid top dollar for the infrastructure, railway, high-speed trains, nuclear power and energy grids French companies could provide, said François Chimits, an analyst focusing on China and trade at the Mercator Institute for China Studies in Berlin.
- Around the early to mid-2010s, however, "China was developing its own domestic competitors and also often closing those sectors to outside investment or trade," Chimits said.
- As a result, "those French corporations were less eager to push the state for greater access to China and in some cases started pushing for protection."
- On a 2018 trip to Beijing, Macron warned that "unbalanced" access to markets would lead to protectionism. In 2021, when he supported the now-suspended EU-China investment deal, he was attacked by both the French right and the left.
National security: In France, "China until a few years ago wasn’t considered any kind of security player," said Yixiang Xu, China fellow at the American Institute for Contemporary German Studies at Johns Hopkins University.
- But then the Chinese military began an aggressive island-building campaign in the South China Sea and pushed Pacific Islands to cut ties with Taiwan and open their ports to Chinese navy vessels.
- This directly impacted France. More than 1.5 million French citizens live in French territories in the Indo-Pacific, including Mayotte, La Réunion, New Caledonia and French Polynesia, and 93% of France's economic exclusion zone — waters near a country's coast to which it has exclusive rights — are there as well.
- In 2018, France became the first EU member to adopt an Indo-Pacific strategy.
- "France is the only European Union power that is resident in the Indo-Pacific," Xu said. "China is expanding its security role in the region, and they feel this more acutely than any other country in the European Union."
Public opinion: French public opinion doesn't flatter China, a trend that worsened during COVID.
- 62% of respondents in France said they had a very negative or negative view of China, a 2020 survey by the Central European Institute of Asian Studies found, coming in second only to North Korea in countries they viewed as unfavorable.
- 83% of respondents in France said the Chinese government does not respect the rights of its people, a 2021 Pew Research Center survey found.
- On the bright side: The 2020 survey found 45% of French people had a positive view of Chinese culture and only 28% had a negative view.
Yes, but: France has worked hard to maintain a working relationship with China, and Beijing for its part has cast its relationship with France as a relative bright spot in its increasingly strained ties with Western countries.
- In a phone call with Emmanuel Macron after the French president's re-election in late April, Chinese President Xi Jinping praised France's "independence and autonomy," echoing China's previous support for European "strategic autonomy" from U.S. foreign policy.
- In February, the two countries also announced joint plans to build seven infrastructure projects worth a total of $1.7 billion across Africa, Asia and Europe.
- The French Embassy in D.C. did not respond to a request for comment.
Between the lines: "France, as most European countries, has a tendency to keep only the most positive topics for bilateral discussions and push the negative ones through EU-China discussions," Chimits said.
- That tendency contributes to the perception in the U.S. that Europe in general, and France in particular, is unwilling to challenge Beijing on difficult issues.
2. China's latest economic data shows lockdown's toll
Why it matters: China is the single largest contributor to world growth, so its slowdown will ripple out in the form of lower economic activity and corporate profits worldwide.
Driving the news: New data out Monday showed retail sales activity collapsed in April, with unemployment rising and exports and industrial production slowing sharply.
- Retail sales fell 11.1% in April, compared to the prior year, with considerable declines in major categories like restaurant spending and auto sales (a total of zero vehicles were sold in Shanghai).
- China's surveyed unemployment rate rose to 6.1%, just shy of the high of 6.2% reported during the early days of the COVID outbreak in 2020.
- Industrial and export activity decelerated to 4% and 3.9%, respectively, as lockdowns in key industrial hubs such as the Yangtze River Delta — home to Shanghai — took their toll.
The bottom line: "The April activity data shows that the temporary disruption from the zero-COVID policy is more severe than expected, raising significant downside risk," JPMorgan analysts wrote in a research note.
3. Catch up quick
1. A shooter who killed one and injured others at a Taiwanese church in California was motivated by anti-Taiwan sentiment, NPR reports.
2. Students at Peking University, an elite university in Beijing, protested a strict COVID lockdown, the New York Times reports.
3. President Biden hosted the leaders of eight Southeast Asian countries amid regional competition with China. Go deeper.
4. The White House called on Hong Kong to release a prominent 90-year-old Catholic cleric arrested last week. Go deeper.
5. The Chinese government is restricting the ability of some Chinese citizens to leave the country, Radio Free Asia reports.
4. Interview: Paulina Garzón on Chinese investment in Latin America
The big picture: China is South America's top trade partner, and Chinese banks and companies have built roads, dams, mines, solar power plants, and even a space mission control center in countries across the continent.
- "Projects tend to perform better when they have good environmental standards in place, when there are mechanisms for the community to communicate," said Paulina Garzón, executive director of the China-Latin America Sustainable Investments Initiative based in Washington, D.C.
- "You don’t find those kinds of tools among the Chinese banks," she said.
Garzón, who is from Ecuador, has spent the past eight years pushing Chinese institutions in South America to take more responsibility for the environmental impacts of their projects there.
- "I started doing this work after we started seeing a surge of Chinese investment," she said. "We were very concerned about the lack of environmental standards among the Chinese institutions" and the "lack of access to Chinese regulators, banks and companies."
- A Chinese hydroelectric dam project in Argentina's far south began in 2015 but halted in 2017 after warnings by environmental and indigenous groups. If completed, the project is also expected to damage nearby glaciers.
- Another proposed dam in Uruguay will displace indigenous communities and flood local forests and grasslands.
Garzón sees several reasons for the persistent lack of standards and of the tools used to implement them:
- Chinese institutions are relatively new. Western-led development banks have had decades to create and refine their environmental standards, but Chinese institutions are relative latecomers to South America.
- Local governments are nervous about questioning China. Because many governments have a complex diplomatic and financial relationship with China, including Belt and Road Initiative projects, "they feel nervous that if they question that project, there are many other things going on with China that can be at risk if they are too critical," she said.
- China itself lacks a strong civil society. Authorities shut down Chinese community organizations if they act without approval, so large state-owned firms aren't accustomed to accommodating community-based demands. As a result, Chinese institutions abroad haven't created channels to work with community groups to resolve problems, Garzón said, whereas Western-led institutions take this as a part of their normal operational model.
What to watch: The White House has announced a "Build Back Better World" program to compete with China's Belt and Road Initiative in South America and other regions.
- The Summit of the Americas, a multilateral event held once every three years, will take place next month in Los Angeles — the first time since 1994 that the U.S. will host — but some Latin American leaders are threatening to boycott if the U.S. does not invite Cuba, Venezuela and Nicaragua.
5. What I'm reading
Message from afar: The Shanghai lockdown’s viral trend: "African warrior" videos (The Diplomat)
- The videos "follow a similar format: A group is lined up behind a blackboard (or a screen) displaying a message in Chinese, then someone off screen reads that message and the 'actors' shout or chant it back. At the end they break into a dance. Some videos feature the actors firing gunshots into the air."
- "The trend intersects with several deeper issues in China: national branding, misconceptions about foreign partners (particularly Africans), and unrealistic expectations."
Huawei still here: China tech’s grip persists in U.S. long after orders to rip it out (Bloomberg)
- "More than 100 telecom providers are still connecting mobile phone calls for hundreds of thousands of customers with gear from Huawei Technologies Co. and ZTE Corp. Chinese-made equipment is also still serving Department of Defense facilities, the corporate jets of some of the largest US companies and the biggest commercial airlines."
- "Meanwhile, the mandate to rid US telecom networks of billions of dollars’ worth of Chinese tech is also posing a public safety risk. Carriers say that without adequate funding for a federal aid program known as Rip and Replace, they’ll have to cut service to swaths of rural America, reducing the reach of 911 services along busy highways — or halt it altogether."
Space jam: Space won't be safe until the U.S. and China can cooperate (Scientific American)
- "The most critical area is the safety of space infrastructure, where a lack of communication could be damaging and possibly even deadly. This need was highlighted by the recent saga of a near miss between two of Elon Musk’s Starlink satellites and China’s in-progress crewed space station."
- "Some kinds of cooperation are illegal. The Wolf Amendment prohibits NASA from using government funds to engage with the Chinese government and China-affiliated organizations. However, this legislation does not block all cooperative possibilities. ... Cases like this could be better handled in the future through direct communication."
6. 1 photo thing: Tesla sets sail
Hundreds of electric vehicles produced by Tesla's factory in Shanghai wait to be shipped out of the city's Nangang harbor in this May 15 photo.
- The Tesla factory resumed operation on April 19 after being temporarily shuttered due to COVID lockdowns there.
A big thank you to Matt Phillips, Astrid Galván and Alison Snyder for edits; Sheryl Miller for copy edits; and Shoshana Gordon and Thomas Oide for visuals.