Welcome to this week’s edition of Trade War.
Don’t miss next Wednesday’s talk by Matt Pottinger on China and the U.S. Pottinger, the former deputy national security council advisor, is a fluent Mandarin speaker who previously spent years in China and Hong Kong as a journalist, and has been at the center of the U.S. shift to a tougher stance towards China over the last four years. I will be moderating (more details at end of newsletter.)
This week saw the opening of China’s annual political confab, the “two sessions,” which is approving new rules that damage already battered political freedoms in Hong Kong. China’s premier announced an economic growth target for 2021 and plans for a major development strategy to boost indigenous technology capacity.
Biden looks ready to focus more on the four-nation Quad grouping in dealing with China. And a new poll by Gallup shows U.S. attitudes towards China falling to the lowest since the survey began and ten percentage points lower than just after the June 4, 1989 Tiananmen massacre.
‘Two Sessions’ further eroding Hong Kong freedoms
During the annual “Two Sessions” meeting now happening in Beijing, China’s legislature is tightening “rules on who can run for office in Hong Kong,” writes Erin Hale in Al Jazeera.
This will follow the 2020 decision to pass the Hong Kong National Security Law. “Delayed by COVID-19, last year’s event was held in May and saw the adoption of sweeping national security legislation for Hong Kong that was billed as necessary to “restore stability” following mass protests in 2019 but has led to a swift crackdown on the territory’s pro-democracy movement,” writes Hale.
The “Two Sessions”, or lianghui, as they are known in Chinese, include the advisory body the Chinese People’s Political Consultative Conference, which opened on March 4, and the more important National People’s Congress, which opened the following day, and which typically meet for only about two weeks each year.
Block these pawns of anti-China forces
“Hong Kong will amend its election legislation after China’s top legislative body passes new election rules for the city’s leader and lawmakers,” Bloomberg tweeted, citing a statement from Chief Executive Carrie Lam.
“For years, anti-China forces seeking to disrupt Hong Kong have been colluding with external forces in an attempt to seize the jurisdiction over Hong Kong, with clear goals and concrete actions,” the official Xinhua New Agency said in a commentary Friday.
“Effective measures must be taken to block these pawns of anti-China forces from being elected to HKSAR's governance architecture, and knock them out once and for all.”
Major breakthroughs in core technologies
China aims to achieve “major breakthroughs in core technologies,” including semiconductors, computer processors, cloud computing and artificial intelligence, premier Li Keqiang announced in the work report, his opening address to the National People’s Congress, reports Bloomberg News. The premier also called for r&d spending to grow annually by 7 percent.
“Li’s speech punctuated goals enumerated in China’s 14th five-year plan [2021-2025], also released Friday, which prioritized advances in younger spheres such as quantum computing, neural networks and DNA banks. The document enshrines a multi-layered strategy both pragmatic and ambitious in scope, embracing aspirations to replace pivotal U.S. suppliers and fend off Washington, while molding homegrown champions in emergent fields,” writes Bloomberg.
6% growth target & ‘high-quality’ development
With plans calling for GDP to rise by “over 6 percent” this year, lower than economists forecasts, Beijing has set “a conservative economic growth target for this year, shifting its focus from recovery mode to longer-term challenges like reining in debt and reducing technological dependence on the U.S.,” reports Bloomberg News.
“A target of over 6 percent will enable all of us to devote full energy to promoting reform, innovation, and high-quality development,” said Li Keqiang. “In forestalling and defusing risks in the financial sector and other areas, we face formidable tasks,” the premier said, citing over-investment, debt-burdened local governments, low consumer spending and lagging innovation, as major challenges.
Rubber-stamp but votes suggest Xi support
While the National People’s Congress may generally deserve its rubber-stamp reputation, parsing the 3,000-some members votes on personnel decisions, major legislation, and key reports can reveal political insights, including of late, growing elite support for Xi Jinping, writes MacroPolo’s Neil Thomas.
“Until the late 1980s delegates typically endorsed these items by ‘unanimous consent,’ and majorities of 99% remain normal. But the introduction of ‘anonymous electronic voting machines’ in 1990 helped encourage some legislators to express criticism by voting ‘no’ or ‘abstain’ on controversial issues,” writes Thomas, citing how when China was battling extreme air pollution in 2013 the new NPC environment committee received only 67 percent approval.
“So how critical have NPC delegates been since they elected Xi as president in 2013?” writes Thomas. To answer that, he looks at votes from 2006 to 2020 on the premier’s work report, the National Development and Reform Commission’s report on economic and social development, the Ministry of Finance’s report and the work reports of the NPC, Supreme People’s Court, and the Supreme People’s Procuratorate.
What Thomas found was “marked improvement in the approval rates” of all six reports since Xi succeeded his predecessor Hú Jǐntāo. “This movement is especially clear for the three most contentious reports — one on budgets and two on law enforcement,” (controversial because of perceptions of fiscal mismanagement and judicial corruption), “but even the most politically sensitive vote, on the government work report, sees a noticeable uptick,” he writes.
Biden signals tough stance on China
Even as he has focused on dealing with the Covid-19 vaccine rollout and pushing through the $1.9 trillion stimulus, Biden has been at pains to demonstrate his administration won’t be a pushover when it comes to China, reports the Financial Times.
“We are in the midst of a fundamental debate about the future and direction of our world,” Biden said last month speaking to the online Munich Security Conference. The choice is between those who argue that “autocracy is the best way forward and those who understand that democracy is essential.”
The US and its allies face “long-term strategic competition” with China and must “push back” against its “economic abuses and coercion that undercut the foundations of the international economic system,” Biden said.
“People thought there was going to be a huge difference between the Trump and Biden administrations,” Nadège Rolland of The National Bureau of Asian Research told the Financial Times. “But from the first few weeks, it seems there’s going to be a lot of continuity, not in style and tone but in the awareness of the challenges posed by China.”
One serious challenge: getting the Europeans to agree to taking a similar stance towards China. “US-EU co-operation is going to be harder than anybody likes to admit. It is easy to say, but harder to do as evidenced by the EU-China investment agreement,” Anja Manuel, director of the Aspen Security Forum told the paper. “It wasn’t really the ideal way to go out of the gate.”
U.S. to lean on Quad to counter China
The Biden administration is planning to counter China in part by further developing the Quad, the four nation grouping which includes the U.S., Japan, India and Australia, report Financial Times’ reporters Demetri Sevastopulo and Amy Kazmin.
“The Biden administration is making the Quad the core dynamic of its Asia policy,” a person familiar with the plan told the paper.
“Kurt Campbell, the White House Indo-Pacific policy co-ordinator who is spearheading the effort, has held several meetings with ambassadors from the group, which was initially launched in 2004 to respond to the tsunami that devastated Indonesia and parts of south-east Asia.”
The group has also discussed a coordinated effort to distribute vaccines to other countries to counter China’s own “vaccine diplomacy,” according to the Financial Times.
Sustained challenge to a stable and open int’l system
The White House has released an Interim National Security Strategy Guidance describing China as the only competitor that has the power to “mount a sustained challenge to a stable and open international system.”
The national security guidance places “a firm emphasis on US interests in the Indo-Pacific region compared to a focus on the Middle East during the Barack Obama era,” reports the South China Morning Post.
“The agenda document added that the US would support Taiwan as a “leading democracy and a critical economic and security partner,” an inclusion that Taipei welcomed,” the Hong Kong paper wrote.
“The island’s foreign ministry spokeswoman Joanne Ou on Wednesday said there had been continuous expressions of strong support for Taiwan under the Biden administration and reiterations that the US security guarantee for Taiwan was “rock-solid.””
US views on China worse than after Tiananmen
U.S. views towards China have plummeted to their lowest since Gallup started measuring them, and are ten percentage points lower than immediately after the Tiananmen Square massacre in 1989, according to a new poll.
“Americans' favorable ratings of China have plummeted to a record low 20%, following a 13-percentage point drop in favorability from 33% a year ago. This comes on the heels of last year's eight-point decline, measured after the coronavirus first spread in China but before it became a worldwide pandemic.”
“The findings also coincide with reports of increased hate crimes against Asian Americans across the United States, something Biden hopes to blunt by condemning anti-Asian speech in a recent executive order and directing the federal government to avoid such language in its operations.”
Notable/In Depth
A look at China’s 2035 long range plan to reach a $30 trillion economy and exceed the U.S., and how it may be “prepared to forgo immediate growth to set up for the longer haul,” from MacroPolo’s Damien Ma.
“The China drama includes a major paradox. The authoritarian and rigid nature of its governance system — with no rivals to President Xi Jinping or succession plan — is simultaneously the biggest threat to the global order and China’s biggest fault line,” writes economist George Magnus in this interesting commentary.
How the 2021 Myanmar coup will affect China-Myanmar relations, is discussed in this ChinaPower Podcast, where CSIS Bonnie Glaser speaks to Ambassador Derek Mitchell.
China to have 400 million less people by the end of this century, with the weight of global population shifting to South Asia and then Africa, tweets former World Bank China chief Bert Hofman, citing this chart from the United Nations Population Project.
116,668 minutes of cartoons is just one in an avalanche of factoids in China’s annual communique from late February, points Gavekal Dragonomics’ Andrew Batson.
Speech by Matt Pottinger, former deputy NSC advisor
This is sure to be interesting: Matt Pottinger, former deputy national security advisor, is speaking on China and the U.S. next Wednesday evening via the Mansfield Center at the University of Montana. I will be moderating. Free signup in the link.