Welcome to Newsletter 40, the latest edition of Trade War. A new survey shows growing negative opinions of China. amongst countries including Spain, Germany, Canada, South Korea, the UK and the U.S., while 39 nations have signed a statement raising concerns about conditions in Xinjiang and Hong Kong.
Pressure on Taiwanese tech companies to diversify supply chains outside China is ratcheting up and tensions in the Taiwan Strait are continuing to grow. Meanwhile, the pandemic is causing China to push for debt renegotiations around the world, another sign of pullback in Xi’s signature Belt and Road Initiative.
Time for China to rethink “wolf warrior” diplomacy?
Negative views of China are rising rapidly, with a particularly dramatic surge over the last year, shows a new survey by the Pew Research Center. In each of the 14 countries surveyed, a majority have an unfavorable view of China, with Beijing’s handling of the pandemic being a major factor, according to Pew.
“In most countries, around three-quarters or more see the country in a negative light. In Spain, Germany, Canada, the Netherlands, the U.S., the UK, South Korea, Sweden and Australia, negative views have reached their highest level in the 12 or more years that Pew Research Center has been polling in these countries,” the report says.
Negative views of China were up the most in Australia, with 81% now seeing the country in a poor light, up 24 percentage points since last year. In the UK about three-quarters of respondents had a negative opinion of China, up 19 points, and in the U.S. it reached 73 percent, up 13 percentage points since last year.
Promise fatigue from unfulfilled Chinese reforms
Meanwhile, European support for China too is slipping, with Xi Jinping’s latest pledge to end carbon emissions in 40 years being “greeted with a healthy dose of skepticism, even among many environmentalists,” writes Noah Barkin, a senior visiting fellow at The German Marshall Fund of the United States.
“Europe’s position on China has hardened considerably since it swooned over Xi’s win-win speech in Davos. Promise fatigue has set in after years of unfulfilled Chinese reform pledges.”
39 countries “gravely concerned” about Xinjiang & Hong Kong
39 countries have signed a statement saying they are “gravely concerned about the human rights situation in Xinjiang and the recent developments in Hong Kong.”
The countries which included Albania, Australia, Canada, Croatia, New Zealand, Norway, the United Kingdom, as well as the U.S. and Germany, amongst many more, wrote of concerns about reports of forced labour and forced birth control including sterilization in Xinjiang, and elements of the Hong Kong National Security Law which allow for cases to be transferred to China for prosecution.
China’s WTO dilemma
China has issues with the two remaining contenders for head of the World Trade Organization, a former Nigerian finance minister and South Korea’s present trade minister, both of which are women, reports the South China Morning Post.
Former finance minister Ngozi Okonjo-Iweala holds a US passport and spent years working in Washington at the World Bank, which has China fretting she may be too close to the U.S. Meanwhile, the regional politics of the WTO mean that having South Korean Yoo Myung-hee, an Asian, as the head official could prevent China from having its own official in one of the four deputy positions.
Taiwan tech supply chain diversification: “a very confusing era”
The push for global supply chain diversification is putting pressure on companies around the world, perhaps most notably on Taiwan’s tech giants including Foxconn, Wistron, and Pegatron. “Sitting astride a fault line separating China and the U.S. in a new technology cold war, Taiwan's companies are being forced, albeit unwillingly, to choose sides,” reports Nikkei Asia.
“Taiwan is in a key position to witness this new emerging U.S. policy because its tech companies sell equally to both sides,” writes Nikkei Asia, citing Taiwan Semiconductor Manufacturing Co. and Foxconn, who “count as clients top U.S. companies like Apple, Microsoft, Google, Amazon, Qualcomm, Hewlett-Packard, and Dell, as well as leading Chinese companies such as Huawei, Lenovo, Xiaomi, Alibaba Group Holding, and Oppo.”
"It is a very confusing era. The tech industry in decades has never needed to pay such close attention to the international political dynamics as now," Tung Tzu-hsien, chairman of Apple supplier Pegatron said at a recent Taipei forum.
China no longer afraid of Taiwan escalation
China is increasingly confident that it can fight and win a war with Taiwan, says a report by Australia’s ABC News. The ability of the U.S. to deter a Chinese attack is also diminishing and it is unlikely that other countries in the region would join Washington if it went to war to defend Taiwan.
“It is much more of a draw than it used to be … it's no longer the case like in the 1990s that the presence of a US aircraft carrier [in the Taiwan Strait] is enough to deter China. Now they remind the United States that they can sink those if they wanted to," Oriana Skylar Mastro, a fellow at Stanford University's Freeman Spogli Institute for International Studies, told ABC News.
Be prepared for a war of attrition
China’s now regular military flights testing Taiwan are putting a huge burden on Taipei’s air force, reports CNA. Taiwan must be “prepared for a war of attrition with China, following an increase in Chinese military maneuvers near Taiwan in recent months with the aim of wearing down the nation's military,” military experts tell the Taiwanese national news service.
“The increased frequency of PLA incursion into Taiwan's ADIZ means Taiwan's military aircraft have been forced to increase maintenance, including fueling and replacing spare parts, increasing the workload of maintenance crews and military logistics personnel,” reports CNA, citing a Taiwan defense ministry official.
COVID-19 pushes Chinese debt renegotiations
More evidence that the pandemic is hitting China’s overseas investments, including those part of the Belt and Road Initiative, has emerged in a report by research house Rhodium Group.
“Even before the COVID-19 shock, China’s borrowers were seeking restructurings as major repayment deadlines loomed in 2019-2020,” the New York-based Rhodium writes. “COVID-19 has accelerated the trend. We find that at least 18 processes of debt renegotiation with China took place in 2020, and 12 countries are still in talks with Beijing as of end-September, covering USD 28 billion in Chinese loans.”
Notable/In Depth
What might Biden trade policy look like, how would he deal with China, and who might he tap for the USTR - all are considered in this fascinating report by Robert Kuttner in the American Prospect.
Experts weigh in on three of the most complicated areas in the U.S.-China economic relationship: trade, technology, and investment, in this report from The Wire China.
Here’s an informative chart of the biggest exporters from China. And where do most of them come from? (Hint: look across a certain troubled strait)
Former USTR Charlene Barshefsky talks to Hank Paulson in this podcast that ranges from discussing growing up in Chicago to why getting China in the WTO was the right decision.
With everyone increasingly hawkish, Lighthizer emerges as a relative dove on China - and, controversially, comes down against a possible trade deal with Chinese arch rival Taiwan. More in this interesting piece by the New York Time’s Ana Swanson.
Upcoming talk
I am looking forward to talking about The Myth of Chinese Capitalism to the China-Britain Business Council next Wednesday. Details in this link.