Geo-Strategic Trend - 6. page

German newspaper Deutsche Welle published an article that discussed the reason behind China’s growing interest in the Middle East.

The article takes note of the differences between the United States and China’s approaches and roles in the region. Last year, under China’s mediation, Iran and Saudi Arabia restored diplomatic relations. The analysis examines why Chinese leadership has concentrated so much diplomatic energy on the Middle East, arguing that the geostrategic interests centered on oil acquisition have undergone a shift.

Fifty years ago, the US and Saudi Arabia reached a “petrodollar agreement” which established the US dollar as the international reserve currency. With the maturation and widespread use of shale oil extraction technology in the US, however “the region’s (Middle East) oil has become less important to the US.” While the US still imports oil from Saudi Arabia, the volume has declined to less than a third of what it was 22 years ago. Notably, the US has risen from being one of the largest oil importers to the third largest oil exporter.

In contrast, China is now Riyadh’s largest crude oil customer, buying over 20% of Saudi Arabia’s total output. China’s energy security is heavily dependent on the Middle East, and it is also the largest buyer of Iranian oil, accounting for 37% of Iran’s oil exports. China has not joined Western sanctions on the Iranian regime and its state-owned firms have capitalized on the absence of Western companies in the Iranian market.

Amid geopolitical tensions, China is increasingly interested in trading in its own currency rather than US dollars to purchase the coveted oil. Direct RMB settlement also makes sense for many countries in the region as China has surpassed the US as the largest trade partner.

The Deutsche Welle article says that “In the past decade, Beijing has cleverly expanded its influence, filling every vacuum left by Washington. But this also means increased vulnerability, as Middle East political stability aligns with China’s interests due to robust bilateral trade and energy needs. Unlike the US, China does not view Iran as an adversary, nor does it feel a special affinity towards Israel for moral or historical reasons, opening up new operational space for Beijing in the region.”

Source: Deutsche Welle, August 19, 2024
https://p.dw.com/p/4jde8

China News recently reported that the government of Thailand has ordered relevant governmental departments to strictly control the quality standards of products imported from abroad so as to reduce the impact of illegal and substandard products on Thai consumers and businesses. The orders apply to goods traded both offline and online. The Thai Ministry of Commerce and relevant agencies have discussed the implementation of standards and regulations for imported products. In addition, the Thai government has also decided to levy value-added tax on imported products purchased online with a value of less than 1,500 baht (around US$44).

For offline imported goods, the government will inspect low-cost products from abroad and check whether commercial institutions comply with Thai laws, such as whether business registration is legal, whether foreigners in Thailand apply for work permits, whether intellectual property rights are infringed, etc. For online product sales platforms, Thailand Customs will conduct quality standard inspections on products imported from overseas after being purchased online. This new government order to strictly control the quality of foreign products is intended to allow Thai people to use high-quality, standardized products while protecting the interests of domestic Thai companies.

Source: China News, August 13, 2024
https://m.chinanews.com/wap/detail/cht/zw/10267903.shtml

South Korean media and some experts believe that, after Kim Jong-un’s visit to Russia and his summit with Vladimir Putin in September 2023, there are subtle signs of changes in the relationship between China and North Korea.

Earlier, several South Korean media outlets reported that the “bronze footprints” left by Kim Jong-un during his visit to China’s Dalian city in May 2018, where he walked with Xi Jinping on the Bangchuidao beach, had disappeared by May of this year. The original location of the “bronze footprints” has been covered with asphalt and no traces are visible. Additionally, the South Korean newspaper Chungang Ilbo reported that, in early July of this year, China demanded the repatriation of all North Korean laborers within its borders. North Korea is also transferring some of its IT workers from China to Russia; these workers earn foreign currency by conducting cyberattacks. Such overseas laborers are a significant source of foreign currency for North Korea.

The Chungang Ilbo quoted sources indicating that Kim Jong-un had instructed North Korean diplomats working in China to “not be intimidated by China.” This directive was issued following Putin’s visit to Pyongyang in June of this year and his signing of a “comprehensive strategic partnership” agreement. North Korea has also tightened control over the Chinese expatriates within its borders, restricting their movement and limiting their contact with North Korean residents. On July 27, the Chinese ambassador to North Korea was notably absent at an event in Pyongyang commemorating the 71st anniversary of the Korean War armistice. Ambassadors from Russia, Vietnam, and Cuba were present at the event.

Some experts caution that apparent changes in Sino-North Korean relations should not be overinterpreted. The relationship between the countries may not grow as rapidly as the relationship between North Korea and Russia, but this does not necessarily indicate that North Korea is abandoning its ties with China.

Source: Aboluo, August 13, 2024
https://www.aboluowang.com/2024/0813/2090571.html

Honda is reducing car production capacity in China for the first time, as Japanese automakers face declining market share due to competition from local electric vehicle (EV) manufacturers. The slow adaptation to EV technology has proven costly for Japanese companies, leading to a shrinking supply chain in China.

Chinese automakers, particularly BYD, are aggressively pricing their vehicles to gain market share, even in segments traditionally dominated by foreign gasoline-powered cars. In 2023, Chinese brands held 56.2% of the passenger car market in China, while Japanese brands fell to 14.7%. Toyota’s Vice President predicts “difficult years” ahead in the Chinese market.

The Chinese government has been strategically promoting the transition from gasoline to electric vehicles, described as “changing lanes in a race” by a former minister. This includes offering subsidies and preferential policies to encourage the shift to “new energy vehicles.”

Japanese companies supplying parts and materials to automakers in China are also feeling the impact. Some, like Nippon Steel, are withdrawing from joint ventures with Chinese partners. A 2023 survey shows Japanese business expansion in China at its lowest level in a decade.

Japanese firms acknowledge the rapid technological advancement of Chinese companies and stress the need for continuous innovation and cost competitiveness. While Japanese automakers are determined to improve their EV offerings, they face significant challenges in regaining their position in the Chinese market.

Source: Kyodo News, July 26, 2024
https://china.kyodonews.net/news/2024/07/6c47f1ecf945-ev-.html

A recent Deutsche Welle article discussed concerns over Chinese companies’ involvement in sensitive infrastructure projects in Germany, particularly in the telecommunications and energy sectors. The article noted the difficulty Germans face in determining how much influence Beijing has over any given Chinese company, leading to apprehension around cooperation with such companies. The German government recently announced plans to phase out use of Huawei and ZTE components from the country’s core 5G network by 2026, citing national security concerns.

The Deutsche Welle article mentions the controversial plan by German investment company Luxcara to commission an offshore wind farm in Germany to be built by Chinese firm Ming Yang. The plan has sparked debate within Germany because energy supply is considered a sensitive sector. Wind power is becoming increasingly important in Germany’s energy mix, accounting for 38.5% of total electricity generation in the first quarter of 2024.

European suppliers cannot meet the current high demand for wind turbines, leading some German operators to consider Chinese partners. One of Luxcara’s reasons for choosing Ming Yang is the firm’s promised ability to provide high-powered turbines for the project by 2028.

The Deutsche Welle piece discusses concerns about data security as well as the competitive advantage that Chinese companies gain through government subsidies, noting that 99% of Chinese “new energy” companies received direct government subsidies in 2022.

Some argue that Chinese products are necessary for Germany’s green energy transition due to their affordability and availability, despite the associated risks.

Source: Deutsche Welle, July 30, 2024
https://p.dw.com/p/4ivFE