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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

Briefings | | |   Geo-Strategic Trend

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

Briefings | | |   Geo-Strategic Trend US-China Relations

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

Briefings | | |   Geo-Strategic Trend

Lianhe Zaobao: South Korean Government Establishes Working Group on China’s Financial Risks

Singapore’s primary Chinese language-newspaper Lianhe Zaobao recently reported that the South Korean government has responded to elevated risk in China’s real estate industry by setting up a special working group, the “China Economic Situation Team,” focused on the impact of Chinese financial risk on the Korean economy.

According to the article, the group will work under the policy guidance of the Ministry of Finance, maintain close cooperation with multiple government branches such as the Bank of Korea (the Central Bank), the Ministry of Industry, Trade and Energy, and the Financial Commission, and pay careful attention to changes in China’s economic situation. In addition, the government’s high-level dialogue mechanism will also focus on China’s real estate financial risks.

Given that the Korean and Chinese economies are tightly linked, South Korea’s Ministry of Finance thinks that the South Korean government should closely monitor the impact of Chinese risk on the Korean financial market and real economy. South Korea’s Economic Emergency Management Working Group, chaired by the deputy minister of the Ministry of Finance, will discuss countermeasures, and the Committee on Macroeconomic and Financial Issues will also evaluate China’s economic situation frequently.

Source: Lianhe Zaobao, August 20, 2023
https://www.zaobao.com.sg/realtime/china/story20230820-1425349

Briefings | | |   Geo-Strategic Trend

For “Humanitarian Reasons,” China Doesn’t Block Philippine Resupply of Grounded Warship in Disputed Waters

On August 7, China blocked two Philippine supply vessels from unloading supplies at the Second Thomas Shoal in the South China Sea. China blocked the supply vessels by firing water cannons at them. The vessels were supposed to deliver supplies to soldiers stationed on a Philippine warship BRP Sierra Madra that has been grounded at the atoll since 1999. Both China and the Philippines claim sovereignty over the Spratly Island area where the Second Thomas Shoal is located.

On August 22, the Philippines sent resupply ships to the shoal again. This time, China didn’t stop them.

Following the event, Xinhua published a statement by the Spokesman of Chinese Coast Guard Bureau: “On August 22, two Philippine supply vessels and two [Philippine] marine police vessels entered the waters adjacent to the Second Thomas Island in the Spratly Islands area without the permission from the Chinese Government. In accordance with the law, the Chinese Marine Police gave the Philippine vessels a stern warning, followed them throughout their entire journey, and effectively restrained them. At the same time, in view of the fact that the Philippine vessels were not carrying large-scale building materials, the Chinese Marine Police made a temporary special arrangement for humanitarian reasons, allowing the Philippine vessels to transport food and other living necessities to the military vessels stranded on the beach. China has indisputable sovereignty over the Spratly Islands and their adjacent waters, including the Second Thomas Island. China firmly opposes the Philippines using the excuse of “resupply” to deliver illegal building materials to the illegally-grounded warship. The Chinese Maritime Police will continue to protect China’s rights and carry out law-enforcement activities in the waters under China’s jurisdiction in accordance with the law.”

Source: Xinhua, August 22, 2023
http://www.news.cn/world/2023-08/22/c_1129816942.htm

Briefings | | |   @CS Geo-Strategic Trend

China’s Weaponization of Mekong River Dams to Pressure Downstream Countries

For the past decade, the Mekong River has had abnormal water pattern: high flows during the dry season and low flows during the rainy season. This is caused by the upstream Chinese dams, which release water for power generation during the dry season and retain water during the rainy season.

The Mekong River has a total length of more than 4,800 kilometers (~3000 miles) in its main branch. Its 2,139-kilometer (1330 mile) upper section in China is known as the Lancang River. After flowing out of China, the Mekong River flows through five countries in Southeast Asia – Myanmar, Laos, Thailand, Cambodia, and Vietnam. It is a lifeline supporting 65 million people.

By the end of December 2020, the Chinese Communist Party (CCP) had built 12 giant dams on the main branch of the Lancang River, with eight more under construction. In addition, there are 85 dams on hundreds of tributaries to the Lancang River.

On January 1, 2019, China put four newly-constructed dams into operation. As a result, the Lower Mekong has experienced a severe drought starting that year and lasting for more than four years (through the present).

The year 2020 was the driest year for the Mekong on record. Although upstream Chinese reservoirs had sufficient water during the rainy season, some of the Mekong River beds downstream were dry and cracked.

China’s use of dams to exert pressure on downstream countries has been going on since at least 2016. In March of that year, the Mekong River’s water volume was reduced, and Vietnam’s rice region suffered a severe drought, with seawater back filling the river bed. The CCP then took the “generous” step of releasing water for “disaster relief.” A week later, China’s then-Premier Li Keqiang hosted the Lancang-Mekong Cooperation Meeting in Sanya, Hainan. The five thirsty downstream countries signed the Lancang-Mekong Agreement, signing on to Chinese investment, loans, and a special fund to promote China’s Belt Road Initiative in Southeast Asia.

Source: Epoch Times, August 10, 2023
https://www.epochtimes.com/gb/23/8/10/n14051766.htm

Briefings | | |   @CS Economy/Resources Geo-Strategic Trend

CCTV and African Media Discuss Future Collaboration

Chinese state newspaper People’s Daily reported that state broadcaster China Central Television (CCTV) signed a cooperation agreement with the African Broadcasting Union (ABU) and several other African media organizations upon Chinese President Xi Jinping’s visit to South Africa. The agreement aims to “strengthen cooperation in content creation and sharing, technological innovation, personnel training, and industry expansion.” It also aims to “promote mutual understanding and people-to-people exchanges between China and Africa.”

As part of the agreement, a “China-Africa Friendship (Season 4)” Chinese film and television program exhibition has been launched. According to People’s Daily, more than 10 high-quality programs will be screened by the mainstream media of South Africa, Zambia, Zimbabwe, and 10 other African countries.

Source: People’s Daily (China), August 22, 2023
http://paper.people.com.cn/rmrb/html/2023-08/22/nw.D110000renmrb_20230822_7-02.htm

Briefings | | |   Geo-Strategic Trend

Guangcha: U.S. Media Reported on China’s New Airport at Disputed Island Near Vietnam

Chinese media outlet Guangcha reported on a story run by U.S.-based news website The Drive. The “Warzone” of section of The Drive reported that China is building an airport on Triton Island, a small island among the disputed Paracels archipelago in the South China Sea. Triton Island is the closest of the archipelago’s islands to the coast of Vietnam.

Satellite images show a newly constructed runway, a large construction area, and a cement factory. The Drive’s article notes swift progress on construction of a 600-meter (2,000 feet) runway which the article says enhances logistic and aviation support capabilities, strengthening the Chinese army’s presence. The runway could be used for hosting short takeoff and landing fixed-wing types, such as turboprops and light aircraft, and also unmanned drones. According to the article, the island expands China’s surveillance and regional denial capabilities and may also be able to host forward operations such as submarine base.

The Guangcha article, after republishing some content from the article by The Drive, quoted Wang Wenbin, spokesperson of China’s Ministry of Foreign Affairs: “The U.S.’ use of the South China Sea issue to provoke issues among regional countries is extremely irresponsible and has ulterior motives.” “China, together with ASEAN countries, will continue to work to maintain peace and stability in the South China Sea and to promote prosperity and development in the region.”

{Editor’s Note: Guangcha is a Chinese media outlet that translates or summarizes reports from media in other countries with the purpose of aggrandizing the Chinese communist regime or of criticizing the U.S. and other Western countries, taking shots at the Western democratic system and “`values.}

Sources:
1. Guangcha, August 17, 2023
https://www.guancha.cn/military-affairs/2023_08_17_705410.shtml
2. The Drive, August 15, 2023
https://www.thedrive.com/the-war-zone/runway-being-built-on-chinas-closest-island-outpost-to-vietnam

Briefings | | |   @CS Defense/Military Geo-Strategic Trend