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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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Xinhua Commentaries: “Exposing the Three Major Political Deficits of the U.S.”

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The CCP’s Performing Arts Troupes in the U.S.

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Chinese EV Executives’ Worries

In the first quarter of this year, the year-on-year growth rate of BYD’s electric vehicle (EV) exports exceeded 150 percent, reaching over 97,000 units. Some 15,700 vehicles were shipped to Brazil during the first quarter, accounting for 16 percent of total exports. There was also a surge of exports to Mexico, which may be attributed to concern over possible upcoming Mexican tariffs or sanctions following the possible election of Trump as U.S. President.

China’s accelerating EV exports triggered a bidding war on cargo shipping costs. The Shanghai Containerized Freight Index showed that, from late January to late April, the cost of shipping from China to the South American destinations, including Mexico and Brazil, rose by 55.8 percent. These rising shipping costs reflect the increased demand for shipping along those routes.

In contrast, during the same period, the freight index for shipments from China to Europe decreased by 31 percent. Possible factors contributing to the lower demand for shipping from China to Europe include the European Commission’s investigation into accusations of unfair subsidies in China’s EV industry as well as EU tariffs starting as early as July.

An executive from a major Chinese electric vehicle manufacturer stated that “We are not worried about the new tariffs the U.S. might impose on Chinese electric vehicles because we do not sell directly to the U.S. However, we are concerned about the signals [U.S. tariffs] sends to other countries, especially to U.S. allies.”

Source: China Times, May 19, 2024
https://www.chinatimes.com/realtimenews/20240519001718-260408?chdtv

Briefings | | |   Economy/Resources

Beijing Sanctions U.S. Defense Contractors and Congressman Mike Gallagher

On May 20, Taiwan’s new President Lai Ching-te was sworn into office. On the same day, Beijing announced sanctions against three American defense contractors: General Atomics Aeronautical Systems, General Dynamics Land Systems, and Boeing Defense, Space & Security, for their involvement in arms sales to Taiwan.

On the next day, Beijing announced sanctions against Republican Congressman Mike Gallagher, who served as the Chairman of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party before resigning in April this year. The Chinese government said it will “freeze” Gallagher’s movable and immovable assets and other types of property within China; prohibit Chinese organizations and individuals from engaging in transactions, cooperation, or other activities with him; and deny him a visa and entry into China.

Gallagher, 40, has served as a federal congressman from Wisconsin since 2017. He is a staunch China hawk, having strongly condemned Beijing’s malign policies and practices, and having repeatedly expressed firm support for Taiwan. In February of this year, Gallagher led a delegation from the U.S. Congress to visit Taiwan, meeting with then-President Tsai Ing-wen and President-elect Lai Ching-te.

Source: VOA, May 21, 2024
https://www.voachinese.com/a/china-sanctions-ex-us-lawmaker-and-supporter-of-taiwan-20240521/7620716.html

Briefings | | |   @CS US-China Relations

Taiwanese President Responds to Forced Political Statements by Taiwanese Artists in China

{Below is a partial translation of an article by Voice of America (VOA) regarding a statement by Taiwanese President Lai Ching-te on the CCP’s coercion of artists into supporting unification of Taiwan with mainland China.}

After Taiwan’s newly elected President Lai Ching-te spoke about “mutual non-subordination across the Taiwan Strait” in his inauguration speech, the Chinese Communist Party (CCP) launched an exercise in military harassment. It also organized a round of propaganda campaigning, forcing Taiwanese artists to express on Chinese social media site Weibo that they support the CCP’s unification of Taiwan with mainland China and oppose Taiwanese independence. Many Taiwanese celebrities who are developing their careers in mainland China had to post content such as “Taiwan independence is a dead end” and “Taiwan will inevitably return (to the mainland).” Those who did not make such posts in time were named and shamed by the “fifty-cent army” or the Chinese public, facing the threat of the “iron fist of socialism.”

Facing this situation, Lai Ching-te made a rare public statement. He said that this was not the first time, and would likely not be the last time, that Taiwanese cultural workers have been forced to make political statements in China. He said that every time Taiwanese cultural workers face pressure under another’s roof, he feels very distressed. He expressed his hopes that the Taiwanese public would understand that what these cultural workers say under such circumstances is one thing and what they (really) think in their hearts is another thing. He said what they feel in their hearts is more important; they should be given understanding and empathy.

Lai Ching-te’s speech garnered praise from many mainland Chinese netizens who bypassed the firewall on the X platform and commented in simplified Chinese. Some said that the Taiwanese president’s statement immediately made them into fans, and some noted the stark contrast between democracy and autocracy. Some remarked that the current Taiwanese government not only has a high Emotional Quotient (EQ) but also high Intelligence Quotient (IQ), making Beijing’s actions look petty in comparison. Some even praised Lai Ching-te’s move as a masterstroke, leaving the CCP unable to respond.

Source: VOA, May 26, 2024
https://www.voachinese.com/a/china-pressuring-taiwanese-entertainers-into-making-political-statements-20240526/7627359.html

Briefings | | |   Geo-Strategic Trend Government/Politics

Chinese Author: Foxconn’s Departure Greatly Impacts Henan Province

An article posted on Chinese social media portal QQ warned that Foxconn’s departure from China has caused big economic damage to Zhengzhou and Henan, its hosting city and province. Foxconn is headquartered in Taiwan.

Located in Zhengzhou, Henan Province, Foxconn is a major Original Equipment Manufacturer (OEM) for Apple phones. It is Henan’s largest export enterprise. Foxconn has been cutting back on production and exports since 2023. In 2023, Henan province’s phone export decreased by 14.5 percent to 57.61 million units. In the first quarter of 2024, it dropped to only 6.64 million, from the 16.88 million in the same period a year ago.

Foxconn is the backbone of Henan’s economy. In 2023, the import and export volume at the Zhengzhou economic zone, where Foxconn is located, was 407.3 billion yuan (US$ 56.13 billion), accounting for 74 percent of Zhengzhou’s imports and exports and 50.3 percent of Henan’s imports and exports. In the first quarter of this year, Foxconn’s imports and exports decreased by 44.1 percent, dragging down Henan’s foreign trade growth by 23.5 percent.

Since Foxconn came to Zhengzhou in 2010, over 200 upstream and downstream supporting enterprises have followed suit and settled in Henan. Henan’s electronic industry quickly scaled up, and the overall scale of Zhengzhou’s electronic industry grew 25 times. Take Zhengzhou Airport Economic Zone as an example. The GDP of Zhengzhou Airport Economic Zone was only 20.6 billion yuan in 2010. It reached 117.2 billion yuan by 2021. At its peak, Foxconn contributed up to 25% to Zhengzhou’s GDP.

Undoubtedly, Foxconn’s departure will have a major economic impact on Henan. A logic solution is to bring in alternative industries, such as the booming electric vehicle (EV). However, can the EV industry replace everything? With common sense, people know that, no matter how large the EV industry becomes or how promising its future is, it absolutely cannot replace the real estate industry and the mobile phone industry simultaneously.

Source: QQ, May 20, 2024
https://new.qq.com/rain/a/20240520A03Y7H00

Briefings | | |   Economy/Resources Geo-Strategic Trend

Xinhua: China Launches Anti-Dumping Investigation Into Chemical Products From The West

Xinhua recently reported that the Chinese Ministry of Commerce has announced an anti-dumping investigation into imports of copolymer polyoxymethylene originating from the European Union, the United States, Taiwan and Japan. Chinese manufacturers in the copolymer polyoxymethylene industry have officially submitted an anti-dumping investigation application.

According to Xinhua, copolymer polyoxymethylene has good comprehensive mechanical characteristics such as high mechanical strength, fatigue resistance, and creep resistance. It can partially replace metal materials such as copper, zinc, tin, and lead. It can either be used directly or after modification, with applications in auto parts, electronic appliances, industrial machinery, daily necessities, sports equipment, medical equipment, pipe fittings, construction materials and other fields.

Deutsche Welle (DW) Chinese Edition reported that the Chinese anti-dumping investigation will last for one year and might be extended for another 6 months after that “under special circumstances.” Industry analysts expressed the belief that this Chinese government’s investigation is a countermeasure against Western countries’ recent intensification of crackdowns on Chinese electric vehicles and other products. China’s polyformaldehyde production capacity is 590,000 tons/year. Most of this capacity is low-end output. In recent years, China has typically needed to import over 300,000 tons of polyformaldehyde annually, with a large portion of imports being used in the high value-added auto parts industry as well as the high-end electronic and electrical industries.

Sources:
(1) Xinhua, May 19, 2024
http://www.xinhuanet.com/fortune/20240519/7a3f2ddecc404265b18569cb1e0ed119/c.html

(2) DW Chinese, May 19, 2024
https://p.dw.com/p/4g2r7

Briefings | | |   Geo-Strategic Trend

China’s Metro Systems Mired in Debt Despite Increasing Revenue and Government Subsidies

An analysis of 2023 financial reports from 29 Chinese cities’ metro companies revealed that all surveyed companies operated at a loss after government subsidies were deducted. The combined debt of these metro firms reached a staggering 4.3 trillion yuan (US$613 billion). Over the past four years, debt levels have risen annually across Chinese metro systems.

Media reports indicate that, while most metro operators saw revenue increases in 2023, many experienced profit declines despite rising government subsidies. In terms of revenue, Shenzhen Metro remained the nationwide leader, earning 25.15 billion yuan (US$3.59 billion) in 2023 – up 1.18 billion yuan (US$168 million) from the prior year. After subtracting 730 million yuan (US$104 million) in government subsidies, however, Shenzhen Metro posted a 180 million yuan (US$25.6 million) net loss.

Beijing Metro was among the most profitable in China, with a 2.4 billion yuan (US$342 million) net profit in 2023. However, it received a massive 25.34 billion yuan (US$3.61 billion) in government subsidies. After Beijing and Shenzhen, the Chinese metro companies with the highest net profits were those of Chengdu, Tianjin, Changchun, Qingdao, Ningbo, Nanjing, and Fuzhou. Of the 29 firms analyzed, 25 saw rising revenues but 17 suffered declining profits. Excluding subsidies, all posted a loss.

Fundamental drivers of ballooning metro debt include poor management, corruption scandals, and local officials pursuing “vanity projects” to boost their political credentials, leading to excessive subway construction and debt accumulation. These issues stem from systemic factors within China.

Source: Radio Free Asia, May 27, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/ql-05272024000605.html

Briefings | | |   Economy/Resources

China Establishes $48 Billion Phase III National Semiconductor Fund

China has established a “Phase III National Semiconductor Fund” with a registered capital of 344 billion yuan ($48 billion) as part of efforts to build a national team for the semiconductor industry. The Ministry of Finance is the largest shareholder of the fund, with a 17.44% stake.

According to media reports, the National Integrated Circuit Industry Phase III Investment Fund Co., Ltd. was officially established on May 24th, with Zhang Xin as the legal representative. The company’s business scope includes private equity fund management, venture capital fund management services, equity investment, investment management, and asset management activities.

The fund’s other shareholders include state-owned policy banks, state-owned enterprises, and major commercial banks. The National Semiconductor Phase I and II Funds were established in 2014 and 2019 with registered capital of 98.72 billion yuan and 204.15 billion yuan, respectively.

Analysts suggest that, while the previous two funding phases focused on semiconductor equipment and materials, Phase III may prioritize investment in high-value products like High Bandwidth Memory (HBM) and advanced DRAM chips.

The establishment of national semiconductor funds reflects China’s long-term strategic plan to boost its semiconductor industry through substantial financial support, aiming to achieve self-sufficiency in critical technologies. The Chinese government appears committed to strengthening China’s semiconductor capabilities and reducing reliance on foreign suppliers.

Source: Central News Agency (Taiwan), May 27
https://www.cna.com.tw/news/acn/202405270165.aspx

Briefings | | |   Defense/Military

Exiled Writer Yuan Hongbing Reveals Chinese United Front Strategy Targeting Taiwan’s Legislature

In February, exiled Chinese writer Yuan Hongbing revealed that China aims to use the Kuomintang’s (KMT’s) influence in Taiwan’s legislature to advance its united front strategy, sparking a political storm. Yuan stated in an interview that the information came from a “princeling” (child of a Chinese revolutionary leader) whom Xi Jinping does not dare to challenge. The Chinese Communist Party (CCP) wants to turn the KMT into the vanguard force of the People’s Liberation Army to achieve unification of Taiwan with mainland China from within.

According to Yuan’s analysis, the CCP is not just using military intimidation to destabilize Taiwan; it is also using propaganda, deployment of agents, and expansion of the KMT’s legislative power to override the Taiwanese administration. Yuan said that the CCP wants the KMT to pave the way for Xi Jinping to fully occupy Taiwan, and that the recent military drills are aimed at supporting the CCP’s agents in Taiwan.

While some members of Taiwan’s Democratic Progressive Party may have been co-opted by Beijing, Yuan said that the party as a whole rejects CCP influence. This stands in contrast to the political attitude of the pro-China KMT party.

Yuan stated that the CCP’s Taiwan policy has shifted from coercion and enticement to psychological warfare, aiming to demoralize Taiwanese. He praised the peaceful protests outside the of Taiwan’s Legislature as social forces advocating for self-defense that could resist Beijing’s intimidation.

Yuan, a former Beijing University law professor, was exiled from China for supporting the 1989 pro-democracy movement.

Source: Central News Agency (Taiwan), May 24, 2024
https://www.cna.com.tw/news/acn/202405240174.aspx

Briefings | | |   Geo-Strategic Trend