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Geo-Strategic Trend

China Expands Security Ties in Indian Ocean, Intensifying Rivalry with India

China has recently intensified efforts to deepen security ties with countries in the Indian Ocean region. It has signed a new security agreement with the Maldives, and it dispatched a military delegation to visit three other countries in the region earlier this month.

On March 4th, the Maldives’ Defense Ministry announced the signing of a military assistance agreement with China to “nurture stronger bilateral ties.” Details were not provided. China’s Defense Ministry also sent a delegation on a 10-day visit to the Maldives, Sri Lanka and Nepal. They met with Maldivian President Mohamed Muizzu and Maldives defense officials to “discuss regional security issues of common concern,” develop bilateral military relations, and promote defense cooperation.

Concurrently, India began withdrawing around 80 security personnel from the Maldives at Muizzu’s request. The Indian personnel had been deployed to operate helicopters and aircraft for surveillance or rescue operations.

Chinese research vessel activity near the Maldives has increased recently. A Chinese research vessel visited the Maldives last month, raising Indian security concerns that Beijing could use gathered data to deploy naval ships to the region.

Analysts suggest that the Indian Ocean region is becoming another arena for geopolitical rivalry over the next decade, with the potential for low-level conflicts between major powers like India and China. According to David Brewster of the Australian National University, China’s recent developments in the area are part of long-term efforts to boost the country’s regional security presence. Brewster said “China has been doing this for about 15 years, seizing opportunities to increase its Indian Ocean presence.”

India has been taking steps to bolster its own presence in the region and partner with like-minded democracies. Indian policymakers may worry about China’s increasing security footprint in the Indian Ocean.

Source: Voice of America, March 19, 2024
https://www.voachinese.com/a/china-presence-in-indian-ocean-20240319/7534315.html

Lianhe Zaobao: South Korean Direct Investment in China Drops Sharply

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported on data released by South Korea’s Ministry of Finance showing that South Korea’s 2023 new direct investment in China dropped by 78.1 percent year-over-year, falling to US$1.87 billion. This is the largest decline in South Korean direct investment in more than 30 years, and it is the first time since 1992 that China has failed to rank among South Korea’s top five destinations for investment. The manufacturing sector  led the decline in investment.

The declining numbers reflect China’s changing role in South Korea’s economy as Washington seeks to reduce Beijing’s influence on global supply chains. The United States is about to replace China as South Korea’s largest export destination, importing products ranging from semiconductors to automobiles. South Korean companies have extensive exposure to key sectors in the U.S. and have been seeking to increase investment there to take advantage of the United States’ market scale and  government subsidies.

According to statistics from the Korea International Trade Association, China’s imports from South Korea last year were US$162.5 billion, a sharp drop of 18.8 percent from the previous year. This led to a US$18 billion trade deficit between South Korea and China, the first trade deficit seen during the 31 years since the establishment of diplomatic relations between China and South Korea.

Source: Lianhe Zaobao, March 15, 2024
https://www.zaobao.com.sg/realtime/world/story20240315-3160390

RTI: Japanese Company Bridgestone Closes Shenyang Factory

Radio Taiwan International (RTI) recently reported that Bridgestone, Japan’s largest tire manufacturer, announced the closure of its factory in the Chinese city of Shenyang. The company also plans to terminate the production and sales of commercial vehicle tires in China during the first half of 2024. The Bridgestone Group has been operating in China for more than 20 years. Bridgestone closed its tire factory in Huizhou, Guangdong Province at the end of 2021 and transferred production capacity and equipment to Shenyang.

Japan was the first country to have foreign businesses enter China during the modern era. In recent years, foreign companies, including many from Japan, have withdrawn from the Chinese market. Experts have said that Japan is a “weathervane” for foreign investment in China, and that foreign business withdrawals from China are now accelerating. This is quite inconsistent with the Chinese government’s messaging around business-friendliness. Since last year, world-renowned companies including Japan’s Canon, SONY, Toshiba, Nikon and South Korea’s Samsung have withdrawn from China, affecting tens of thousands of Chinese employees.

Source: RTI, March 15, 2024
https://www.rti.org.tw/news/view/id/2199093

China Threatens Paraguay Over Diplomatic Relations with Taiwan

At the Chinese Foreign Ministry’s press conference on March 25, a reporter asked: “According to reports, Paraguayan President Peña said on March 23 in a social media post that the 66 years of diplomatic relations between Paraguay and Taiwan have been ‘deep’ and ‘friendly.’ And this has not hindered Paraguay’s trade with China, as the country is still exporting soybeans to China. What is China’s comment on this?”

Foreign Ministry spokesman Lin Jian stated that there is only one China in the world, Taiwan is an inalienable part of China’s territory, and the government of the People’s Republic of China is the sole legitimate government representing all of China. “China is the world’s top soybean importer. According to official Chinese statistics, China has imported zero soybeans from Paraguay in recent years. If the Paraguayan government truly wants to work for the development of the country and the wellbeing of its people, it should see the big picture and choose to stand on the right side of history, instead of putting its mind on ‘playing smart’ and ‘exploiting loopholes.'”

Source: Xinhua, March 25, 2024
http://www.news.cn/world/20240325/8d6027121dd741cf92f016423ca23259/c.html

Chinese Ambassador to Russia: In Principle There is No Problem With Russia Borrowing Money From China

Russian state-owned news agency Sputnik reported that Zhang Hanhui, China’s Ambassador to Russia, told Sputnik that in principle there is no problem with Russia borrowing money from China by issuing bonds or taking out loans; only technical matters of how to implement such borrowing remain.

Zhang said, “More than 90% of bilateral settlements [between China and Russia] are now denominated in RMB. The percentage may grow even higher in the future. Both sides conduct settlements in RMB as well as in other currencies, including the Ruble. Regarding [Russia] issuing Bonds in China and borrowing money in China, this matter is open for discussion. There is no problem in principle [with Russia taking out debt from China], though the technical matter of how specifically to accomplish this requires further discussion among [financial] professionals.”

Zhang also said that the recent obstacles to cross-border transfers between Russia and China have to do with interference from third-party countries. He said “The obstacles occurred because some countries created troubles for us, but I believe we can find ways to overcome them.”

Russian Finance Minister Anton Siluanov said in an earlier interview with Sputnik that he had been in discussions with his Chinese counterpart about the feasibility of RMB borrowing, with the two countries’ finance ministries touching on the topic near the end of 2023, but as of yet no final decision has been made.

Source: Sputnik, February 28, 2024
https://sputniknews.cn/20240228/1057339595.html

Lu Shaye: China Should Play Bigger Role on Global Stage; It Has Become an Elephant and Can No Longer Hide

Lu Shaye, China’s Ambassador to France, returned to China to attend the National Committee of the Chinese People’s Political Consultative Conference. During an interview on March 6th with China Youth Daily, Lu Shaye said, “If a country (China) wants to expand its position and influence internationally, it must actively participate in global governance and multilateral affairs.” He said that in the past, during the period when China was relatively poor, Western countries would “look down” while dealing with China, but now they are basically “looking straight ahead,” and in some cases they may in fact be “looking up” at China.

Again referring to China, Lu Shaye stated that a big country should act like a big country, and it cannot simply “hide its light (capabilities) and bide its time” as it did in the past. “This light cannot be hidden, and time cannot be bidden. You have become an elephant; you are no longer able hide behind a tree.”

Source: Central News Agency (Taiwan), March 8, 2024
https://www.cna.com.tw/news/acn/202403080300.aspx

Taiwanese Scholar: Wang Huning’s “Spider Strategy” to Slowly Swallow Taiwan

On March 4th, chairman Wang Huning of the Chinese People’s Political Consultative Conference delivered a statement on the topic of China-Taiwan relations. The statement, titled “Work Report of the Standing Committee,” proposed a strategy of “strengthening cross-strait industrial cooperation, building a common market across the straits, holding the sixth Cross-Strait Grassroots Governance Forum, and promoting the integrated development of both sides of the strait.”

Song Guocheng, a Senior Researcher at the International Relations Research Center of Taiwan’s Chengchi University, called Wang Huning’s plan a “spider strategy” to gradually swallow Taiwan. Song published an article on the implications of Wang’s strategy, analyzing four key phrases used in Wang’s statement. Below are translations of the major points from Song’s analysis.

The first key phrase from Wang Huning’s statement was “cooperation” (合作). Cooperation sounds great. By just saying “cooperation,” the Chinese Communist Party (CCP) can sidestep sanctions and allegations over foreign interference, as it is not “changing the status quo across the Taiwan Strait.” Cross-strait cooperation is, however, a “big brother leading the little brother” style. It could lead to the so called “peaceful evolution” of Taiwan – using economic ties to drive political change, using profit to lure Taiwanese people into acting against their country’s best interest, merging with Taiwan [economically], and making its people willing to submit to subjugation [by China].

The second key phrase is “shared marketplace” (共同市場). This term implies “mutual benefit and shared interests.” But the strategy behind this term is to use the “big economy” of mainland China to “melt/dissolve” the “small economy” of Taiwan; this is the “spider strategy,” with the big enveloping the small, trapping Taiwan in a huge “economic spider web,” using honey as poison to slowly consume Taiwan.

The third key phrase is “grassroots cross-strait governance” (兩岸基層治理). Governance sounds neutral, but it is a sovereignty issue when one discusses “cross-strait governance.” Neither side of the [Taiwan] strait is subordinate to the other, and the governance on each side is unrelated to that on the other side. Of course, the CCP will be able to achieve [such governance] if it can rope in Taiwan’s municipal leaders, public figures, community organizations, agricultural associations, guilds, chambers of commerce, student unions, hometown associations… etc. It uses various pretexts such as “exchange, learn, observe, and inspect” to break through the wall of sovereignty between the two sides. This is its softest, most gentle, and most intimate “slow swallowing” policy.

The fourth key phrase is “integrated development” (融合發展). Development sounds so pleasant, and integration sounds wonderful: you are part of me, and I am part of you! But the true meaning behind this phrase is as follows. “Integration” means slow erosion of Taiwan’s anti-communist consciousness, and “development” means gradual subsumption of Taiwan’s sovereignty. This is a “patchwork policy” to unify Taiwan, also known as the “stacking blocks” policy or the “great dissolution” strategy. Once the puzzle is completed and the blocks are stacked, the time will be ripe for natural unification of China.

Source: Up Media, March 7, 2024
https://www.upmedia.mg/news_info.php?Type=2&SerialNo=196367

German Investment in China Declines Amid Concerns Over Economic Environment

According to a report in German newspaper Handelsblatt, German investors are avoiding China, and German direct investment in China has declined sharply. Some large companies, however, are going against the tide, expanding their businesses in China.

A study commissioned by Handelsblatt and conducted by the Cologne Institute for Economic Research shows that German investment flows to China plunged in the third quarter of 2023, reaching a six-year low of negative €2.2 billion. German equity investment in China fell particularly sharply, with a flow of negative €3.9 billion.

Funds flowing to China from other countries also decreased. During the third quarter of 2023, total foreign investment was negative for the first time in a quarter century, meaning more capital flowed out of China than flowed in. Some large companies like BASF, however, are going against the flow and continuing to expand their business in China.

On the other hand, there were positive signs regarding reinvested profits. Although German reinvestment in China was lower than during prior periods, German companies still reinvested some €1.7 billion of profits earned in China back into their Chinese operations in Q3 of 2023. The study found that many foreign companies operating in China are transferring profits out of the country.

Observers cite several reasons for the investment downturn in China, including a significantly worsened investment environment in recent years as the Communist Party exerts greater control over the economy. China’s economic growth and consumption have also slowed. Many Western countries are also pursuing de-risking strategies to reduce dependence on China.

Source: Radio France International, December 14, 2023
https://rfi.my/AB83