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Geo-Strategic Trend

China Russia Interactions

While the Western world has imposed tough sanctions against Russia for its invasion of Ukraine, China and Russia held a series of activities recently.

  1. On June 10, the Heilhe-Bragoveshchensk road bridge officially opened. Hu Chunhua, China’s Vice Premier, attended and addressed the online opening ceremony.
  2. On June 15, Putin called Xi Jinping on Xi’s birthday.
  3. On June 17, Xi Jinping attended, online, and addressed the plenary session of the 25th St. Petersburg International Economic Forum in Russia.
  4. Russia and China sent naval ships which separately sailed around the Japanese archipelago.
  5. On June 17, China’s Ambassador to Russia Zhang Hanhui said that China is ready to provide airplane parts to Russian Airlines. The Western sanctions ban exporting airline parts and leasing or supplying airplanes to Russia.
  6. On June 20, Russia’s St. Petersburg Stock Exchange started trading 12 stocks listed on the Hong Kong Stock Exchange, including Tencent, Alibaba, Meituan, Xiaomi, and Jingdong.

Sources:
1. China’s Government Website, June 10, 2022
http://www.gov.cn/guowuyuan/2022-06/10/content_5695126.htm
2. China’s Foreign Ministry Website, June 17, 2022
https://www.fmprc.gov.cn/eng/zxxx_662805/202206/t20220617_10705728.html
3. Net Ease, June 23, 2022
https://www.163.com/dy/article/HAGVK42D0542ONXL.html
4. Epoch Times, June 21, 2022
https://www.epochtimes.com/gb/22/6/21/n13764456.htm
5. Net Ease, June 17, 2022
https://www.163.com/dy/article/HA3938FF05198CJN.html

Multinational Corporations Have a Crisis of Confidence in China

The French newspaper Les Échos published an analysis on Multinational companies’ crisis of confidence in China, focusing on the business community’s shock at  the brutal closure of Shanghai. They have been forced to re-evaluate the “China risk” including factors such as the zero-Covid policy, the war in Ukraine and tensions between the US and China.

The analysis says that the closure, as well as the broader disruptions caused by China’s zero-Covid policy, translate into huge economic costs. Foreign companies have massively reduced their forecasts. According to data from the European Union Chamber of Commerce, as of April, 60 percent of European subsidiaries had lowered their business targets for 2022. Production could be suspended at any time, with the epidemic and China’s draconian Covid prevention policies becoming a sword of Damocles hanging over these companies. According to a survey by the French Chamber of Commerce and Industry in China, 80 percent of French subsidiaries said that China’s zero-Covid policy is affecting their investment strategy, with 76 percent believing China’s image has deteriorated.

Geopolitics and the growing competition between the U.S. and China are other major long-term factors. Trade wars have complicated the business of multinational companies in China. The war between Russia and Ukraine has abruptly posed new risks. The potential consequences of Beijing’s possible attack on Taiwan could be even greater than that of Western companies’ retreat from Russia. In addition, companies are weighing the effect of the rise of local competitors, increased regulatory restrictions and the reputational risk of doing business in China due to Western condemnation of issues such as Xinjiang and Hong Kong. Many factors are prompting these companies to reassess their long term “China risk.”

Source: Radio France International, June 21, 2022
https://rfi.my/8WHA

Japan Plans to Establish a New “Integrated Commander” Position

Well-known Chinese news site Sohu (NASDAQ: SOHU) recently reported that relevant sources in the Japanese government revealed that the Ministry of Defense of Japan has generally decided to establish an “integrated commander” to unify the land, sea and Air Self-Defense Forces, as well as an “integrated command” to support the new position. Regarding the motives for the Japanese Ministry of Defense to make this move, Kyodo News said that the Ministry was mainly considering China’s increased maritime activities and new security areas like space, computer networks, and electromagnetic waves, and other areas. Therefore, Japan believed that there is a necessity to have a new dedicated position to improve mobility. Before the end of the year, the Japanese government will revise defense documents such as the National Security Strategy,” the Defense Plan Outline, and the Mid-term Defense Capacity Improvement Plan.  Various branches of the government are coordinating the updates to include the creation of the “integrated commander” in these official documents.

Source: Sohu, June 8, 2022
https://www.sohu.com/a/555167675_114911

Global Times: India and EU to Resume Free Trade Agreement Talks This Month

Global Times recently reported that India’s Ministry of Commerce and Industry said India and the European Union will resume free trade agreement negotiations, which have been stalled for nine years. The first round of negotiations between the two sides is scheduled to start in New Delhi on June 27. For India, this will be one of its most important free trade agreements as the EU is its second largest trading partner after the United States. Between 2021 and 2022, India’s merchandise trade with the EU reached a record high of US$116.36 billion, up 43.5 percent year-over-year. India’s exports to the EU are expected to grow 57 percent to US$65 billion in Fiscal Year 2021-2022. India is currently the EU’s tenth largest trading partner. Before Brexit, an EU study showed that a free trade deal with India would bring benefits worth US$10 billion. Negotiations on a free trade agreement between India and the EU began in 2007, but they were shelved in 2013 due to differences over issues like tariffs on cars and wine. In April this year, the European Commission President Von der Leyen Von der Leyen visited India, and Indian President Narendra Modi also visited Europe in May. The two leaders settled on the roadmap for the negotiation.

Source: Global Times, June 18, 2022
https://world.huanqiu.com/article/48TbaJjAZtw

First Russia-China Transnational Highway Bridge Opens to Traffic

On June 10, Russia and China announced the official opening of the Heilongjiang River Bridge, the first transnational highway bridge between the two countries. While confronting the West over the invasion of Ukraine, Russia is turning to Asia for support.

The bridge, more than one kilometer long, connects Blagoveshchensk, the capital of Russia’s far eastern Amur region, with the city of Heihe in northern China’s Heilongjiang province. Although it was started in 2016 and completed in 2019, the opening ceremony was delayed due to the COVID-19 outbreak.

According to official figures, the bridge, which cost 19 billion rubles (about US$328 million), is a two-lane road. According to Chinese media, the bridge is currently limited to cargo traffic only.

Source: Central News Agency, June 10, 2022
https://www.cna.com.tw/news/acn/202206100334.aspx

UDN: Australia Plans to Re-examine the Port of Darwin Lease to China

United Daily News (UDN), one of the primary Taiwanese news groups, recently reported that Australian Prime Minister Anthony Albanese publicly stated that the Australian government will review its 99-year lease of the Port of Darwin to Chinese companies. According to information on Albanese’s personal website, as early as 2018 when he was Labor Party’s infrastructure spokesman, he had already publicly opposed allowing the Chinese-owned Landbridge Group Australia to obtain the 99-year lease of the Port of Darwin. Subsequently, Albanese has repeatedly objected, saying that the Port of Darwin should not fall into the hands of any foreign enterprises.

Albanese said he had promised before the May election that when Labor came to power, he would push for a review of Landbridge’s lease. Albanese said Labor had backed the then Scott Morrison administration in the past when it was the opposition party to push for legislation so the federal government could block agreements between local governments and foreign entities. The Port of Darwin is the northernmost deep-water port in Australia and the closest to Asia. It is considered to be an important strategic stronghold for Australia. The Landbridge Group’s lease of the Port continues to be the focus of Australia’s national security controversy. However, in March this year, the Australian government announced that it would spend A$1.5 billion (about US$1.1 billion) to build a new port facility in Darwin. The New Port Plan is based on national security considerations, so that the Australian and US troops can avoid using the Darwin port facilities that Chinese companies operate.

Source: UDN, June 8, 2022
https://udn.com/news/story/6809/6374152?from=udn-catebreaknews_ch2

China Upgrades Ream Naval Base in Cambodia to Expand Its Influence

On June 8 in Cambodia, a ceremony marked the start of the new China-funded construction at Ream Naval Base. The senior Cambodian military and defense officials as well as China’s ambassador to Cambodia attended the ceremony.

According to Gen. Chau Phirun, director-general of the Cambodian Defense Ministry’s material and technical-services department, over the next two years, Chinese firms and technical experts from China’s military will build or renovate a number of structures including a maintenance workshop, a slipway and dry dock for repairing vessels, a warehouse, two new piers, and electrical, water and sewage infrastructures,

Cambodian Defense Minister Gen. Tea Banh said in a speech that the funding for the upgrades will be  from a Chinese grant. He denied that the Chinese forces will use the facility as a naval base.

The Wall Street Journal revealed in 2019 that Beijing had signed a clandestine agreement allowing its armed forces to have exclusive use of a part of Ream Naval Base, which is located on Cambodia’s southern coast facing the Gulf of Thailand.

China is helping Cambodia expand and upgrade Ream naval base in the Southeast Asian country, heightening concerns U.S. officials have expressed for years that Beijing plans to establish a naval outpost there. Experts say Chinese forces would be able to use the Cambodian facility to further assert Beijing’s expansive territorial and maritime claims in the South China Sea.

China’s ambassador to Cambodia, Wang Wentian, said at the ceremony, “The Chinese military shall, as always and within its means, provide assistance to the Cambodian military.” Anyone who claims that China is using the facility to expand its influence is “using the yardsticks of knaves to judge a gentleman’s intentions.”

Sources:
1. WSJ, June 8, 2022.                                                                                                                                                                                                                                           https://www.wsj.com/articles/china-to-upgrade-ream-naval-base-in-cambodia-fueling-u-s-concerns-11654674382

2. Epoch times, June9, 2022.                                                                                                                                         https://www.epochtimes.com/gb/22/6/8/n13755167.htm

China’s Government Scholar: We Can’t Allow TSMC to Move to the U.S.

On May 30, 2022, a forum was sponsored by the Chongyang Institute of Financial Studies at Renmin University in China. Chen Wenling, Chief Economist at the China Center for International Economic Exchanges (CCIEE), a Chinese government think tank, gave a talk, according to the China based website guancha.cn.

Chen said, “China should be prepared for the U.S. strategic containment and suppression of China, and make sure that the supply chains are under control.  . . .  We need to sort out the advantages that will sufficiently scare our opponents and cause them irreversible losses and pressures. As a countermeasure, we need to stall and slow as much as possible our opponents’ moves to cut off the supply chain, the chain of scientific and technological cooperation, and the chain of innovation.”

“If the U.S. and the West impose destructive sanctions on China as they did on Russia, we must take back Taiwan. In terms of carrying out industrial chain and supply chain restructuring, we must get hold of TSMC (Taiwan Semiconductor Manufacturing Company) and other companies that originally belonged to China. They are accelerating the transfer to the United States to establish six plants over there. We absolutely cannot let their goal of transfer be achieved.” TSMC is the world’s leading semiconductor manufacturing and design company. It is the world’s most valuable semiconductor company, the world’s largest dedicated independent semiconductor foundry, and one of Taiwan’s largest companies.

“We need to support Russia openly, reasonably and by every possible means. For example, the recent Sino-Russian joint air exercises and so on. We can do more in trade, so that China and Russia can dovetail the ‘Belt & Road’ with the Eurasian Economic Union proposed by Putin to form a strategic depth in China, a Silk Road economic belt, and an energy security belt as a major security barrier.”

“It is necessary to step up cooperation with Europe. Europe is deeply affected by the Russian-Ukrainian conflict, and the euro will be hit hard economically in the future. In addition, Europe will see a food crisis, an energy crisis and a refugee crisis. In the time of crisis in Europe, China can offer a helping hand and increase cooperation between China and Europe, so that the two plates of Asia and Europe can return to their historical status as political and economic centers.”

Source: Guancha.cn, June 6, 2022
https://www.guancha.cn/chenwenling/2022_06_06_643134_s.shtml