Welcome to the 185th edition of Trade War.
Israel-Hamas war reveals shortcomings in China’s aspirations for global influence. China’s economic support for Iran helps to fund the conflict. And an Israeli embassy employee is stabbed in Beijing, a rare attack in China’s capital.
Judge in court hearing on Montana TikTok ban shows skepticism towards state’s arguments. And fear of Chinese spying as well as concerns about harmful content both behind TikTok prohibition.
China reports disappointing consumer price number for September and deflation fears grow before next week’s release of third quarter economic growth. The IMF cuts its China forecast to 5% for 2023 and 4.2% for next year. But the state-run Bank of China predicts growth of 5.2% this year.
Beijing mulls a stabilization fund to support its sagging stock market. Didi Global will list in Hong Kong next year. And China searches world for wheat after heavy rains damage domestic crop.
China’s global aspirations and the Israel-Hamas war
China’s reluctance to issue a strong statement on the Israel-Hamas war reveals shortcomings in its aspirations for global influence, argues Atlantic Council nonresident senior fellow Jonathan Fulton, writing in the New Atlanticist.
“First and foremost, the Middle East is a region where China trades and builds. Its strategic interests are closer to home,” writes Fulton who is also a professor of political science at Zayed University in Abu Dhabi.
“For years, Chinese leaders have promoted “peace through development” as Beijing’s approach to security in the Global South. The idea is that insecurity is the result of underlying economic pressures. Remove those pressures through development, the thinking goes, and the result will be peace,” explains Fulton.
“Any number of countries in the developing world will gladly accept the assistance and the know-how; China’s transformation since the 1970s has lessons for governments everywhere. At the same time, Hamas’s attack last weekend demonstrates that there are times when security requires more than an economic agenda. Beijing’s response may have been so muted because its blueprint for Middle East peace appears remarkably hollow right now.”
China’s “peace through development” in the Global South reminds me of the popular theory that countries with McDonalds won’t fight with each other. That was first proposed in 1996 by Thomas Friedman as the “Golden Arches Theory of Conflict Prevention,” and pretty quickly was repeatedly shown to be wrong (most recently with Russia’s invasion of Ukraine, with both countries home to many McDonalds). Now China’s “economics-only” approach to the Middle East looks under duress with the Israel-Hamas war.
China’s role in conflict runs through Iran
“There is an important relationship between China and Hamas’ attack. First, it is important to remember that the financing and supply of weapons and strategies for Hamas come from Iran,” writes Thiago de Aragao, director of strategy at Brasilia, Brazil-based public affairs firm Arko Advice.
“At the same time, it is important to note that Iran’s ability to finance Hamas and Hezbollah fluctuates depending on its economic situation. That’s exactly where China comes in,” offering Iran “generous lines of credit that are paid through exports of barrels of oil at below market prices,” writes de Aragao.
Beyond the damage it does to China’s reputation in much of the world, why would Beijing care if its money ultimately supports terrorist organizations?
“Well, it’s no secret that China seeks to establish a peaceful (and dependent) relationship with as many countries as possible, including Iran, Saudi Arabia, Israel, and Lebanon, among others. The destabilization of West Asia (through war or other crises) does not help Chinese objectives in the region,” writes de Aragao.
If China does not use its considerable influence over Iran—in parallel with the U.S. doing the same with Israel—that will demonstrate that “China knows how to play a game in times of peace, but not in times of war.”
Through its broad economic support of Iran, China is a key player in the Israel-Hamas war, whether it likes that role or not.
Israel embassy employee stabbed in Beijing
An Israeli embassy employee has been stabbed in Beijing, reports the South China Morning Post.
The 50-year-old victim was stabbed outside a Chaoyang district supermarket at around 2 pm on Friday by a so far unidentified 53-year-old man. Witnesses said the assailant was involved in the “small goods business,” but did identify his nationality.
“An Israeli employee at the Israeli embassy in Beijing was attacked today (not in the embassy area),” the Israeli embassy said in a statement. “The employee is being treated in hospital and his condition is stable. The background of the attack is being investigated.”
“Such an attack, no matter what the purpose, has seriously broken the law on Chinese territory, and should be pursued by the law,” Hu Xijin, the former editor-in-chief of tabloid Global Times, wrote on Chinese social media platform Weibo.
The Chinese public “firmly opposes terrorism,” Hu wrote, adding that while it is “natural that people would associate the attack” with the Israel-Hamas war, they should wait for “further official information about who the attacker is and whether [that attack] is motivated by the conflict.”
Judge skeptical of Montana TikTok ban
A federal judge at a court hearing in Missoula, Montana has expressed skepticism about the state’s ban on TikTok, scheduled to take effect on January 1, 2024.
Calling the law “paternalistic” and the state’s argument “confusing,” district judge Donald W. Molloy, a 77-year-old Montana native appointed by President Bill Clinton in 1996, said he would decide soon on TikTok’s request for a temporary injunction, following a one-hour long hearing on Thursday.
Pointing out that Montana is the only state so far to pass a full ban on TikTok, Molloy commented “Doesn’t that seem a little strange?”
Citing public comments from Montana’s Attorney General Austin Knudsen where he suggested TikTok was working for the Chinese state, TikTok attorney Alexander Berengaut said “the real purpose of the statute is to declare a foreign policy for the state of Montana,” which conflicts with the federal governments constitutional role managing foreign affairs.
“Your argument just confuses me,” Molloy said to Montana Solicitor General Christian Corrigan. “You need to protect consumers from having their data stolen. But everybody on TikTok voluntarily gives their personal data. If they want to give that information to whatever the platform is, how is it you can protect them?”
Attorney General Knudsen’s earlier arguments all seemed to be based on teaching “China a lesson,” not protecting Montanans, the district judge added.
“The legal battle is closely watched because it is viewed as a bellwether for TikTok’s future in the United States, where dozens of states and the U.S. government have already banned the app on official devices but have so far refrained from blocking the app on private devices,” reports CNN.
What’s behind the prohibition on TikTok?
Why has Montana banned TikTok? According to the law’s own language, it aims to stop Chinese authorities from using the app to spy on state officials, business people and journalists, as well as aims to protect Montana youth from harmful content.
The author of this newsletter explains what motivates the ban and what comes next, in an interview on BBC Scotland’s The Nine.
Economy flirts with deflationary spiral
China reported Friday that consumer prices barely budged last month, raising fears that a deflationary spiral could grip the country’s economy.
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