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China’s Reaction to Trump’s Election Win

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Xinhua Commentary Series: Spotlight on the U.S. Presidential Election

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Wu Guoguang: Xi Jinping’s Reversal of the Course, Will China’s Transition be Peaceful or Marked with Bloodshed?

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Cheng Xiaonong: U.S.-China Strategic Relations Have Crystallized

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Germany’s Dilemma: Chinese Wind Turbines in Sensitive Energy Sector

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

Briefings | | |   Geo-Strategic Trend

China Extends Grad School Duration: Education Push or Disguised Jobs Program?

In recent years, many Chinese universities have extended their graduate programs from two to three years, citing reasons such as “improving the quality of graduate education.” However, some observers link this change to rising youth unemployment rates, viewing it as a temporary measure to address job market pressures.

Multiple universities, including Guangxi Normal University, Shenyang University of Technology, and Xi’an International Studies University, have announced extensions to their master’s and doctoral programs starting from 2025. The adjustments affect various disciplines, including chemistry, education, literature, and foreign languages.

Experts argue that postgraduate education emphasizes specialization and depth, requiring higher quality standards. They claim that extending the study period provides more space to meet these requirements and optimize the training process.

Supporters of the change suggest it allows for strengthened classroom teaching, improved education quality, and more opportunities for students to engage in practical experiences. It also gives students more time for thesis writing and job hunting.

Critics of the move acknowledge that this extension may be linked to China’s changing employment landscape, with many graduates opting for “slow employment.” While the longer study period may help students find more suitable jobs, some argue that it shouldn’t be a one-size-fits-all approach or merely a stopgap measure to address social employment pressures. They suggest allowing capable and willing students to graduate early.

Source: Central News Agency (Taiwan), July 25, 2024
https://www.cna.com.tw/news/acn/202407250355.aspx

Briefings | | |   Economy/Resources

China Considers New Local Tax and Bond Issuance to Address Severe Local Government Debt Crisis

China’s local governments are heavily burdened with debt. To address this financial strain, China’s central government is considering the introduction of a new local tax, potentially amounting to around one trillion yuan. Reports suggest that the Central Committee of the Communist Party is studying a consolidation of existing taxes—such as the Urban Maintenance and Construction Tax, Education Surcharge, and Local Education Surcharge—into a new Local Additional Tax. Local authorities would have some autonomy in setting the tax rate within specified limits.

Data from the Ministry of Finance reveals that in 2023, China’s VAT and consumption tax revenues totaled approximately 8.54 trillion yuan. The combined revenues from the existing taxes to be consolidated are estimated at around 949.6 billion yuan. This reform is aimed at addressing the imbalance between central and local financial powers, which has led to a cycle of fiscal disorder.

Analysts offer two interpretations of this policy shift: one suggests decentralizing fiscal authority, while the other implies strengthening central control. Some experts argue that centralizing fiscal control aligns with President Xi Jinping’s strategy for unified national management, reducing the likelihood of substantial decentralization.

The Wall Street Journal highlights that local governments are facing severe debt issues, with hidden liabilities estimated between 7 to 11 trillion yuan, double the central government’s debt. In the first half of 2024, local debt issuance exceeded 3.5 trillion yuan, with expectations for a peak in the third quarter.

To address these issues, some suggest issuing 2 trillion yuan in national bonds for local use. However, experts like Wang Guocheng believe this amount would be insufficient compared to the vast debts of major property developers and local governments. Without comprehensive tax system reforms, local deficits are likely to persist.

Additionally, economist Li Daokui proposes issuing 500 billion to 1 trillion yuan in consumption vouchers to stimulate spending and economic recovery, citing potential multiplier effects from consumer incentives. However, concerns remain about the effectiveness of such measures given current economic conditions and consumer behavior.

Source: Radio Free Asia, July 25, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/hcm1-china-taxation-local-economy-education-07252024054647.html

Briefings | | |   Economy/Resources

People’s Daily: “Weakness of The US ‘Iron Chip Curtain’ Exposed”

People’s Daily published a Chinese translation of an English article from China Daily titled “Weakness of The US ‘Iron Chip Curtain’ Exposed.”

The following are highlights from the original China Daily article:

The Joe Biden administration plans to expand the so-called Foreign Direct Product Rule to more Chinese semiconductor fabrication factories. The Rule gives the US government the power to control the trading of US technologies, including in products made in a foreign country. The Biden administration has employed the provision to ban foreign companies from exporting semiconductor manufacturing equipment and advanced chips that contain US technologies or parts to Chinese companies.

Yet Japanese, Dutch and Republic of Korea companies, including Tokyo Electron and ASML, the two largest chipmaking equipment manufacturers, along with companies from 30 other countries and regions, are to be exempted from the expanded controls. That companies from Malaysia, Singapore, Israel and China’s Taiwan island, are not exempt serves to expose the symbolic nature of the move as part of the Democratic Party’s China-bashing stunts before the presidential election.

The other takeaway from the move is that more and more US allies are starting to distance themselves from the Biden administration’s “chip war” against China in fear of being left high and dry should the former “America-first” US president prove successful in his bid to return to the White House. In other words, instead of showing the success of its “chip alliance” scheme to thwart China’s high-tech progress, the prospective new rule indicates that the “united front” the Biden administration has painstakingly formed over the past more than three years is beginning to collapse.

As a matter of fact, the chip-related deals between China and Japan, the Netherlands and the Republic of Korea have kept rising steadily over the past years as companies from the latter have found plenty of ways to steer clear of the US government’s de facto coercion. Which might be a practical factor spurring the Biden administration to issue the new rule signaling that it will allow them to trade with China, making the move a face-saving attempt.

Source:
1. People’s Daily, August 3, 2024
http://world.people.com.cn/n1/2024/0803/c1002-40291814.html
2. China Daily, August 1, 2024
https://www.chinadaily.com.cn/a/202408/01/WS66ab6e75a3104e74fddb8089.html

Briefings | | |   US-China Relations

Hunan Protester Hangs Banner Calling for Democracy, Provokes National Response by CCP

On July 30, in Xinhua County, Loudi City, Hunan Province, someone identified as Fang Yirong hung a large banner from an overpass and played a loud audio recording demanding reform and democracy. The CCP was extremely alarmed by this incident. The Ministry of Public Security sent personnel to Hunan to handle the case, and “stability maintenance” efforts were increased nationwide to prevent similar incidents from occurring in other regions. There were also reports that the police had arrested the protester, a 22-year-old university student.

The audio recording said

“We want freedom, we want democracy, we want votes! Strike from work, strike from classes, and oust the dictatorial national traitor Xi Jinping.”

This was the same slogan used by Peng Lifa, who posted banners and played recordings in October 2022, sparking the widespread “blank paper” protests a month later.

The banner displayed by Fang Yirong also mirrored Peng’s original slogan, except that the first line of the banner had been altered from “No nucleic acid tests, we want food” to “No privileges, we want equality.” In its entirety, the banner read:

No privileges, we want equality!
No lockdowns, we want freedom!
No lies, we want dignity!
No Cultural Revolution, we want reform!
No leaders, we want votes!
No slaves (of the CCP), we want to be citizens!

On August 2, well-known internet user “Li Laoshi Bu Shi Ni Laoshi” (whose username translates to “Teacher Li Is Not Your Teacher”) posted on the X platform identifying the protester as Fang Yirong. In the post, Li Laoshi shared a video statement that had been recorded by Fang Yirong:

“I have always been a moderate leftist. Since the fire in Urumqi, Xinjiang on November 24, 2022, I lost my last bit of hope in the CCP’s one-party dictatorship. In mid-July 2023, while planning to oppose Xi Jinping’s dictatorship, I was discovered by cyber police. I have been under continuous surveillance and was eventually subjected to house arrest and torture by the CCP authorities. During my house arrest, I tried to reconcile with the CCP. My views shifted from being anti-establishment to pro-establishment, but under intense intimidation, my views gradually reverted to being anti-establishment. I ultimately realized that there is no room for compromise with the devil. I hope you can make my story public and expose the devil’s atrocities!”

Source: Radio Free Asia, August 2, 2024
https://www.rfa.org/mandarin/yataibaodao/renquanfazhi/kw2-hunan-xi-jinping-protest-banner-08022024125456.html

Briefings | | |   @CS Social Stability

Beijing Gives Ukrainian Foreign Minister Cold Reception

Ukraine’s Foreign Minister Dmytro Kuleba visited China recently, marking the first visit by a high-level Ukrainian official since the Russia-Ukraine war. BBC Chinese reported, according to several scholars, Kuleba’s itinerary reflected China’s cold attitude toward Ukraine. The scholars noted that the talks held with Kuleba yielded no substantial results and that they enabled the Chinese government to gather information in advance of the U.S. Presidential elections in November.

It seemed that China didn’t allow Kuleba to go visit Beijing. There was no official disclosure on the time and place of Kuleba’s arrival in China on July 23. On the day after Kuleba’s arrival there was an official announcement from Beijing saying that he would meet with Wang Yi in the southern city of Guangzhou. On July 25, Kuleba appeared in Hong Kong to meet with Hong Kong Chief Executive John Lee. He left China on July 26. Throughout the trip, there was no indication that he had been to Beijing. In China’s diplomatic tradition, this kind of arrangement is rarely coincidental. The government might intentionally arrange meetings to be held outside of Beijing so as to symbolically lower the level of the meetings. Beijing may also want to avoid direct comparisons between China and Ukraine. China’s treatment of Kuleba contrasted with that of Russian Foreign Minister Sergei Lavrov, who visited Beijing for two days in April, met with China’s Foreign Minister Wang Yi, and was received by Xi Jinping at China’s Great Hall of the People.

Kuleba’s Hong Kong visit was also intriguing. The Ukrainian Ministry of Foreign Affairs released detailed reports and photos of Kuleba meeting with Hong Kong’s chief executive John Lee, where Kuleba urged Hong Kong not to support Russia’s evasion of sanctions. The Hong Kong government did not mention the meeting until it was pressed to do so by the media. The BBC noted that John Lee would not be able to deliver support for Ukraine even if asked, as it is Zhongnanhai and not John Lee who makes such decisions.

At the same time as Kuleba’s visit, China hosted representatives of 14 Palestinian factions, including Fatah and Hamas, in Beijing and brokered their signature of a “Beijing Declaration on Ending Division and Enhancing Palestinian National Unity” on July 23. Wang Yi attended the closing ceremony following the signing of the declaration. After talking with Kuleba in Guangzhou, Wang Yi went to Laos on the next day (July 25) to attend the ASEAN Foreign Ministers’ Meeting and to meet with Russian Foreign Minister Lavrov.

Source: BBC, July 29, 2024
https://www.bbc.com/zhongwen/simp/world-69219882

Briefings | | |   @CS Geo-Strategic Trend

Beijing Further Boosts Rare Earth Metal Production with Quotas, Hurts Producers’ Bottom Line

On June 29, China announced “Rare Earth Management Regulations” which stipulate comprehensive state supervision and control over the production and sales of rare earth products. China is currently the world’s leading manufacturer of rare earth metals, holding about 70 percent of the global reserves.

Beijing issued a production quota for Chinese companies – 135,000 tons in the first half of 2024, a 12.5 percent year-on-year increase. Market demand for rare earths did not go up as Beijing expected, however, and price dropped dramatically as a result of the government-mandated increase in rare earth production. The rare earth price index published by the China Rare Earth Industry Association on July 18 dropped by about 20 percent compared to late July 2023.

As a result of oversupply in the rare earth markets, all major Chinese rare earth producers saw significant declines in their profits, in the first quarter of this year. Northern Rare Earth’s net profit fell by 94 percent year-on-year, China Rare Earth reported a loss of approximately 289 million yuan (US$ 40 million), Guangdong Rising Nonferrous Metals a loss of 304 million yuan, and Shenghe Resources a loss of 216 million yuan.

Nikkei Asia pointed out that, in recent years, the CCP has continuously increased the production quotas for rare earth metals. In 2023, Beijing increased the quotas threefold, bringing the annual total to 255,000 tons, a 21 percent increase compared to 2022. Many believe this year’s quotas will go even higher. It seems that Beijing wants to use such increasing quotes to maintain its dominant position in rare earth production and export volume so that it can use rare earths as a bargaining chip in diplomatic negotiations.

Meanwhile, other countries are trying to reduce the reliance on China’s production of rare earths. The United States has expanded domestic rare earth production, and many countries have intensified local efforts to identify domestic rare earth deposits.

Source: Epoch Times, July 19, 2024
https://www.epochtimes.com/gb/24/7/19/n14293824.htm

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

Malaysia Applies to Join BRICS, China Responds With Open Arms

On July 28, the Malaysian Prime Minister’s Office issued a statement announcing that Malaysia has submitted a letter to Russia, the current chair of the BRICS nations, applying to join the BRICS cooperation mechanism. Lin Jian, Chinese Foreign Ministry spokesperson, stated at a regular press conference that “China welcomes more like-minded partners to participate in cooperation with BRICS, jointly promoting the development of the international order in a more just and reasonable direction.”

Source: China Youth Daily, July 29, 2024
http://m.cyol.com/gb/articles/2024-07/29/content_wdpQgohRMA.html

Briefings | | |   Geo-Strategic Trend