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Newsletter 70 - May 29, 2021
Welcome to the 70th edition of Trade War.
Biden’s top Asia official Kurt Campbell proclaims the end of the "engagement” policy with China. And trade czars from both countries have a “candid” telephone call.
A survey shows most of Europe expects China to surpass the U.S. as a global power within a decade. And “science and technology diplomats” are helping Chinese companies source key technology from around the world. Meanwhile, Beijing makes strides in the global scientific research output contest.
Kurt Campbell: no more ‘engagement’ policy with China
“The period that was broadly described as engagement has come to an end,” Biden’s top Asia czar Kurt Campbell said at Stanford University, reports Bloomberg News’ Peter Martin.
“The dominant paradigm is going to be competition,” said Campbell who serves in the National Security Council as U.S. coordinator for Indo-Pacific Affairs.
The change has much to do with the Xi Jinping-led shift to a more assertive global policy, Campbell said, citing border clashes with India, an ”economic campaign” against Australia and the rise of “wolf warrior” diplomacy.
“Beijing’s behavior was emblematic of a shift toward “harsh power, or hard power,” which “signals that China is determined to play a more assertive role,” Campbell said, writes Martin.
Xi: deeply ideological, not overly sentimental about US
“Kurt Campbell's impression of Xi: Deeply ideological, & not terribly sentimental about [the] US,” in contrast to previous leaders president Hu Jintao and premier Wen Jiabao, writes Jacob Stokes, fellow at the Center for New American Security, in this tweet thread on Campbell’s Stanford speech.
Xi “depicted himself as virile, tough, not aging. [Xi] has basically disassembled PRC collective leadership mechanism,” Stokes continues in his recap of Campbell’s comments.
Give China 10 years and it will surpass the US, says Europe
Majorities in eleven European countries believe China will surpass the U.S. as the leading power within a decade, shows a survey by the think tank European Council on Foreign Relations from earlier this year. (The respondents knew Biden would be the president when the survey was done.)
Great Britain, France and Germany all agreed the prospect of China replacing the U.S. was either probable or definite, while Spain, Italy, and Portugal were most certain, with over 70 percent saying it was likely.
Where does China get its technology overseas?
Chinese diplomats from China’s Ministry of Science and Technology play a key role in identifying and sourcing key technologies targeted in Beijing’s development goals, from countries around the world according to this report by Georgetown’s Center for Security and Emerging Technology.
“At home, MOST personnel interface with Chinese firms and track the scientific bottlenecks holding back China’s development. Abroad, they coordinate with overseas scientists, professional associations, diaspora guilds, and elements of the United Front Work Department in the countries where they are stationed, to identify opportunities where Chinese firms can grow relationships and invest.”
“Science and Technology diplomats” stationed in embassies and consulates in 52 countries encourage Chinese companies to take stakes in “supply chains relevant to the Chinese Communist Party’s (CCP) stated development objectives,” with one half of the projects assessed in biotechnology or artificial intelligence.
Almost one half of all technology projects recommended by the S&T diplomats came from Russia, the U.S., United Kingdom, and Japan. And before it was closed last July, China’s consulate in Houston referred more projects than any other Chinese diplomatic post worldwide.
China tech co’s go big in priority areas for the CCP
China’s largest tech companies are spending big in new areas such as cloud computing, autonomous driving and artificial intelligence, "not coincidentally priority areas for the Communist Party."reports Bloomberg News’ Coco Liu.
“Internet giants with immense data and advanced algorithms should shoulder greater responsibility, aim higher and do more in tech innovation,” the People’s Daily wrote in a December commentary, reports Bloomberg.
“The Chinese government expects domestic internet giants to play a bigger role in helping the country achieve tech self-sufficiency,” Shen Meng, a director at a Beijing-based boutique investment bank, said to Bloomberg. “After all, advancing fundamental technologies require massive capital and manpower. In a country which still lacks a mature venture investment ecosystem, deep-pocketed big tech is in a better position than startups to lead that breakthrough.”
Charting China’s research rise
China’s research output in science is growing rapidly. It has already surpassed the U.S. in chemistry research output and is approaching the U.S. in earth and environmental sciences and physical sciences show the charts in this article by Nature.
Meanwhile, China falls in the middle for efficiency for its return on investment for every U.S. billion dollars spent - behind Japan, the U.S., France, and Germany (with Japan getting the best return, then the U.S.), but ahead of the United Kingdom.
Now Tencent in regulator crosshairs
Following the crackdown on Ant Group, Tencent, best known for its WeChat app, has been told by regulators to put its finance business into a new company where they can be better supervised, reports Caixin Global.
“The move signals a widening crackdown on the aggressive expansion by tech groups into financial services fueled by concerns over potential systemic risks to financial stability and their outsized market power after years of relatively unchecked expansion.”
China and U.S. trade czars have ‘candid’ call
USTR Katherine Tai and top China trade czar Liu He had a
”candid” conversation in their first phone call, reports Bloomberg News.
In a statement China’s Ministry of Commerce called the discussion “candid, pragmatic and constructive” while in a separate statement, the USTR said Ambassador Tai raised “the guiding principles of the Biden-Harris administration’s worker-centered trade policy and her ongoing review of the U.S.-China trade relationship.”
The phone call is one of the very few top-level meetings between Xi and Biden’s teams to date; “in contrast with much of the rest of the bilateral relationship, trade has been one of the less contentious issues recently,” reports Bloomberg.
Phase One deal less than 3/4 of year-to-date target
Meanwhile, progress is slow on meeting commitments on the U.S.-China trade deal: through April, China's purchases under the Phase One deal are less that three-quarters of the way to year-to-date targets, reports the Peterson Institute for International Economics.
What needed 16 workers now only needs 4
Faced with the demographic challenge of a shrinking workforce, Chineses companies like Midea are rapidly adding automation, reports the South China Morning Post.
“What used to require 16 people now only needs four, said Xu Nian’en, a director at this Midea plant. The company has, over the last six years, invested 4 billion yuan (US$622 million) to transform itself, raising efficiency by 62 per cent and reducing its workforce by 50,000,” reports the Hong Kong paper.
“While the demographic crunch may be met with a smaller, more skilled workforce in China in future, it could be a negative for those workers who are unwilling or unable to adapt fast enough to more advanced workplace technologies.”
While western analysts refer to “stalled” reforms in China, the reality is reforms continue apace, they are just not liberal reforms, write scholars Rana Mitter and Elisabeth Johnson.
China’s state capitalist model might not ultimately succeed but still could "swamp the world with subsidized products," writes journalist Michael Schuman.
"This manifest slimming down of government offices presents a facade of government transparency despite the latent fact that Xiong’an represents a massive reassertion of state control over economy and society," writes Andrew Stokols.
Here is an interesting thread on what the 2020 census shows about Western China, from Tibet development expert Andrew Fischer.
‘International friends’ or ‘hostile foreign forces’?
I spoke to Radio Free Asia about the Chinese government's longtime use of "international friends" or "hostile foreign forces" dual labels in dealing with those from abroad, including officials, businesspeople and journalists.
Montana views and a bear
Beautiful views and a bear - pictures taken from a recent run to get some Japanese sushi takeout.