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Geo-Strategic Trend - 29. page

Lianhe Zaobao: Financing from China’s Four Major Banks to Russia Surged

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that, since the outbreak of the Ukrainian war last year, Western institutions have imposed a series of sanctions on Russia, and banking institutions have also stopped operations in Russia. However, China’s Big Four banks are lending billions of dollars to Russia, filling the gap left by Western banking institutions. China’s four largest banks, including Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and Bank of China, have quadrupled their exposure to Russia since the war began. At the beginning of 2022, the total loans of the four major banks in Russia were US$2.2 billion. According to the Russian Central Bank, in the 14 months to the end of March this year, this figure increased to nearly US$10 billion. This is part of China’s push to make the Chinese Yuan a global currency that will replace the U.S. dollar. More than 70 percent of trade settlements between Russia and China have been using local currencies. Almost all the currency used by China to purchase Russian oil in the past year was RMB. Before the war, more than 60 percent of Russia’s exports were paid in U.S. dollars and Euros, with RMB accounting for less than one percent.

Source: Lianhe Zaobao, September 5, 2023
https://www.kzaobao.com/shiju/20230905/146186.html

HKTDC: Chinese Companies Planning Overseas Business

Hong Kong Trade Development Council (HKTDC) recently published a research study on Mainland companies’ overseas strategy changes when Belt and Road is now at its 10-year anniversary. The research focused on companies in the Canton Greater Bay Area and the Yangtze River Delta Region. The study found that, in the face of the slow recovery after the pandemic and the increasing business challenges in traditional overseas markets affected by geopolitical factors, many Mainland companies have adjusted their “going global” strategies. Around 83.9 percent of the companies surveyed said they are facing various challenges caused by geopolitical tensions, insufficient market demand, and financing difficulties, etc. Nearly 90 percent of the companies have plans to develop international business in the next one to three years. As many as 72.8 percent of the companies hope to explore business opportunities in RCEP and other Belt and Road emerging markets. They mainly plan to expand international business in four major areas: logistics and transportation (28.8 percent), marketing and sales (26.9 percent), investment and factory establishment (23.3 percent), and overseas procurement (15.9 percent). Successfully conducting international business requires extensive professional service support to assist them in planning and risk management. The study shows that the services most needed include: marketing and e-commerce (97 percent), financing and risk management (89.9 percent), product standards and ESG service support (89.2 percent), as well as tax planning and compliance (88 percent).

Source: HKTDC, September 5, 2023
https://research.hktdc.com/sc/article/MTQ3MTQ1NjU4OA

China’s First Province-Level Anti-Espionage Regulations

On September 1, 2023, the Chongqing municipal government implemented a set of detailed regulations called the “Chongqing Anti- Espionage Work Regulations.” It is the first local government in China to implement such rules following publication of the central government’s revised “Counter-Espionage Law” in July.

Chongqing’s regulations contain 29 articles. The first three articles echoed the central government’s Counter-Espionage Law. Starting from the fourth article, Chongqing’s regulations emphasize the supervisory role of the municipality’s state security agency. They call for close cooperation of various governmental departments in carrying out counter-espionage work, including the department of cyberspace administration, Taiwan affairs, national defense and science and technology, development and reform, education, science and technology, ethnic and religious affairs, public security, civil affairs, natural resources planning, urban and rural construction, commerce, veterans’ affairs, foreign affairs, postal management, and culture and tourism.

Civil services and public institutions will include counter-espionage propaganda in their training programs, and the education system will include such material in its teaching content.

For individuals involved in foreign exchange or collaboration, the regulations mandate a pre-departure anti-espionage education, a program of “overseas management” while the individual is abroad, and a post-return meeting. They also require that institutions stationed overseas or institutions who send people overseas develop espionage-prevention plans.

Many foreign organizations and individuals have been cautious about engaging with China since the Chinese Communist Party (CCP) pushed out the state-level “Counter-Espionage Law.” This has led to a significant reduction in foreign investment and travel to the country.

Source: Epoch Times, September 2, 2023
https://www.epochtimes.com/gb/23/9/2/n14065721.htm

China Declines Japan’s Proposed Mechanism to Assess Treated Nuclear Water

According to information obtained by Kyodo News, the Japanese government proposed that China join an IAEA international mechanism for objectively analyzing and assessing monitoring results related to radioactive material in seawater samples taken offshore from the Japanese Fukushima nuclear plant. Beijing declined to follow Japan’s suggestion. This highlights China’s uncompromising opposition to Japan’s release of treated nuclear waste water into the sea, making it difficult for Japan to enter science-based dialogue.

The international mechanism will compare and analyze monitoring results conducted separately by the Japanese government and the IAEA on seawater near Fukushima. Research institutions selected by an IAEA to participate in the organization include entities from the U.S., France, Switzerland, and South Korea. To ensure objectivity, Japan is not part of the mechanism.

According to sources familiar with Japan-China relations, Japan has repeatedly urged China through diplomatic channels to join the international mechanism, enabling China to make scientific judgments. China, questioning the mechanism’s effectiveness and independence, did not accept the proposal.

Regarding the treated water, Japan proposed that China and Japan establish a consultation mechanism composed of experts and officials from both countries. China has not yet responded to this proposal.

Source: Kyodo News, September 5, 2023
https://china.kyodonews.net/news/2023/09/28ac08ec5e50.html

Chinese Hackers Infiltrate German Corporate and Private Networks to Attack Government Agencies

The German Federal Office for the Protection of the Constitution issued a warning that Chinese hacking groups APT15 and APT31 are targeting German small and medium-sized enterprises and home networks, using the hacked networks to hide their identities when attacking German national and government institutions.

The agency’s cyber briefing report on Thursday said that the hacking groups successfully breached the German Federal Agency for Cartography and Geodesy (BKG) two years ago. The BKG is responsible for creating detailed maps and assessing satellite imagery. The report outlined how the hacking groups exploit security vulnerabilities to gain control of terminals, networks and devices in homes and small businesses.

The agency advised that companies and individuals should update their security software, take stock of all devices on their networks, replace old equipment that can no longer be updated, and change default passwords on new devices.

The hackers exploit flaws in routers, printers, smart home devices, lights, heaters, solar panels and more, using the hacked hardware to conceal their attacks on German national and political bodies. Once they control these devices, they can launch cyber-attacks against organizations, companies and government institutions while hiding behind private, inconspicuous networks.

Source: Deutsche Welle, September 1, 2023
https://p.dw.com/p/4Vpmo

UDN: Czech Central Bank Liquidates RMB Bond Holdings

United Daily News (UDN), one of the primary Taiwanese news groups, recently reported that the Czech Republic’s central bank announced that it has liquidated all of its RMB bond holdings. People familiar with the matter said that this move was primarily motivated by political factors and risk of Chinese invasion of Taiwan.

The Czech-China relationship had cooled significantly since the beginning of this year. The UDN report cited a Financial Times interview with newly-elected Czechian president Petr Pavel, who said “China and its regime is not a friendly country at this moment, it is not compatible with western democracies in their strategic goals and principles.” Pavel was the first elected European head of state to speak to Taiwanese president Tsai Ing-wen. China’s foreign ministry said that Pavel “ignored China’s repeated attempts to dissuade him” and “persisted in stepping on China’s red line”.

According to the latest data released by the Czech National Bank, as of June 30 this year the Czech central bank no longer had any RMB assets in its investment portfolio. In the foreign exchange reserve currency allocation table, the RMB column is no longer present. Members of the Czech financial regulatory organization confirmed that the possibility of a Chinese attack on Taiwan went into the decision to liquidate RMB positions, as did the “economic and non-economic context” surrounding the Czech-China relationship.

At the end of March 2023, the Chinese currency RMB still accounted for 1.9 percent of the foreign exchange reserves of the Czech National Bank. The Czech Republic has been deepening its ties with Taiwan, including exchange of high-level political visits, direct flights between Taiwan and Prague, and a commitment to co-operate in computer chip development.

Sources:

UDN, September 1, 2023
https://udn.com/news/story/7333/7409636

Financial Times, February 1, 2023
https://www.ft.com/content/df41b4a8-97f0-4e20-9ef4-4a53c0ab8f30

Global Times: U.S. Restricts AI Chip Exports to Middle East

China’s Global Times recently published a report on social media regarding new U.S. restrictions that prevent technology companies NVIDIA and AMD from exporting advanced AI chips to the Middle East. Analysts say the restrictions are aimed at preventing Middle Eastern countries from reselling the chips to China.

In a recent regulatory filing for its A100 and H100 chips, NVIDIA disclosed that the Biden administration’s new measures will affect exports of those chips. It’s not clear which specific countries are targeted by the new export controls.

In October of last year, the Biden administration announced its implementation of artificial intelligence (AI) chip export controls targeting China. NVIDIA’s A100 and the H100 were restricted, and AMD’s exports were similarly restricted by the U.S. government. Both companies stated that, although the new control measures will affect the export of some products, they will not have a direct and significant impact on the  companies’ business performance.

On the one hand, the U.S. may be concerned about China’s acquisition of advanced AI chips from Middle Eastern countries, especially considering the close relationship some Middle Eastern countries have with China. On the other hand, the U.S. export controls may not be aimed at curbing AI tech acquisition by China alone; they may also be part of U.S. policy targeting Middle Eastern countries specifically.

Compared with the earlier U.S. measures that targeted exports to China specifically, these latest controls targeting Middle Eastern countries have a less-direct impact on China’s AI industry. According to the Global Times report, however, they still reflect the U.S.’s attempt to stifle China’s semiconductor and AI capabilities.

Source: Global Times, August 31, 2023
https://tinyurl.com/mvuph8k7

Chinese Sentiment Negative After Japan Drains Nuclear Waste Water

Following Japan’s release of diluted nuclear waste water from the Fukushima nuclear reactor into the sea, Japanese individuals in China are facing heightened pressure. Japanese parents living in China are concerned for the safety of their children. Japanese restaurants in China have also been affected, experiencing a significant drop in number of customers.

China’s response to Japan’s release of the waste water has been strong, suspending all imports of Japanese aquatic products. Anti-Japanese sentiment in China’s private sector, previously sporadic, has surged following the event.

There have been protests outside of Japanese embassies and incidents reported at Japanese schools. Protesters threw eggs at a Japanese school in Suzhou, while other threw stones at a Japanese school in Qingdao. Japanese parents living in China are anxious, worrying about their children’s safety on their way to and from school.

Chinese suspicion towards Japanese brands has grown following the Fukushima water discharge — reports indicate consumers returning Japanese skin care and beauty products in protest. Anti-Japanese sentiment has even impacted Chinese families, with Japanese restaurants run by Chinese owners seeing a sharp decline in business. Despite not being Japanese-owned, the restaurants have suffered due to customers avoiding anything related to Japan. The combined impact of these events on Japanese businesses comes in addition to recessionary headwinds affecting the Chinese economy more broadly, creating a challenging situation.

Source: Central News Agency (Taiwan), August 29, 2023
https://www.cna.com.tw/news/acn/202308290115.aspx