After Turbulence in China’s Military, Xi to Redouble Quest for Control; EU's Borrell says he wants to strengthen EU-China relations after call with China's Wang Yi
China's exports likely contracted further in July, imports downturn seen slowing - Reuters poll
Welcome to this issue of The China Brief. Today is August 07, 2023. Here at The China Brief, we bring you the latest news on China's politics, economy, and society from global media sources, along with exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.
After Turbulence in China’s Military, Xi to Redouble Quest for Control
NY Times
The recent replacement of two top generals in the Rocket Force of the People’s Liberation Army (PLA) has raised concerns about a possible resurgence of corruption in China’s military. The officials have disappeared from public view and are suspected of siphoning off funds from the military. The scandal, coupled with the recent removal of Foreign Minister Qin Gang, illustrate that corruption continues to be a problem in China. President Xi Jinping has invested significant resources into taming the PLA, which he has transformed into a loyal force, and any scandal would be a blow to his authority. In 2012, Xi warned that the military was rotting from within and launched a purge, sentencing dozens of senior officers to prison for corruption. However, the removal of officials from the Rocket Force suggests corruption still exists. Xi is likely to continue his strategy of ensuring that cadres remain loyal by subjecting them to constant scrutiny and pressure.
EU's Borrell says he wants to strengthen EU-China relations after call with China's Wang Yi
Reuters
The EU's foreign policy chief, Josep Borrell, has said that he wants to strengthen EU-China relations following a call with China's foreign minister, Wang Yi. The two discussed the upcoming Strategic Dialogue in Beijing and exchanged views on Niger and the Jeddah meeting on Ukraine.
China's exports likely contracted further in July, imports downturn seen slowing - Reuters poll
Reuters
China's exports are expected to have contracted further in July, with a 12.5% fall in outbound shipments from a year earlier, according to a Reuters poll. This would be the worst reading since February 2020 at the start of the pandemic. Chinese factory activity also fell for the fourth straight month in July, putting pressure on officials to deliver policy measures to boost domestic demand. China's state planner hinted at stimulus measures, but investors were underwhelmed by the proposals. Imports are expected to have shrunk by 5.0% in July, reflecting slightly improved domestic demand.
Will autumn visit be third time lucky for Borrell’s China-EU ties talks?
South China Morning Post
EU foreign affairs chief Josep Borrell will visit China in the autumn to have a strategic dialogue and prepare for the EU-China summit. The visit was twice postponed due to Borrell contracting Covid-19 and then the unavailability of the Chinese foreign minister. Borrell expressed his desire to visit China and engage in strategic dialogues as soon as possible. China has expressed optimism about promoting relations with the EU and highly values meetings between Chinese and European leaders. The visit will address issues such as the war in Ukraine, the military coup in Niger, and closer China-EU relations.
Hong Kong Airlines website flooded by thousands jostling for free tickets
South China Morning Post
Hong Kong Airlines' booking website experienced technical issues as thousands of users attempted to secure free tickets in the airline's second giveaway round. Users complained of long waits, error messages, and website crashes. The promotion is part of the government's "Hello Hong Kong" campaign, which aims to encourage residents to travel abroad and revive the city after pandemic restrictions. Hong Kong Airlines has promised to distribute 25,000 tickets over three rounds of giveaways. The tickets are valid for travel between September 1, 2021, and March 24, 2022.
HSBC executive sorry for saying UK 'weak' over China
BBC
HSBC's head of public affairs, Sir Sherard Cowper-Coles, has apologised after accusing the British government of being "weak" for complying with US demands to cut back business dealings with China. Cowper-Coles made the comments during a private roundtable discussion and they do not reflect the views of HSBC or the China British Business Council, according to a spokesperson for the bank. HSBC generates much of its profit in Asia, including China. The global bank has to navigate a fine diplomatic line between authorities in Washington and Beijing due to its significant operations in China.
The lesson of China's failed Australia trade bans: Russell
Reuters
China's decision to end anti-dumping and anti-subsidy tariffs on Australian barley highlights that trade sanctions seldom work. The tariffs on barley and unofficial ban on Australian coal led to Australian farmers and miners finding new markets for their products, often at higher prices. China's calculation was that it could pressure Australia by ending the trade in coal and barley as they could be secured easily from alternate suppliers. However, the disruption to Asia's seaborne coal flows resulted in prices being shifted higher and boosted the price of Australian grades as well.
Mongolia looks to rise out of China and Russia’s shadow
Washington Post
Mongolian Prime Minister Luvsannamsrain Oyun-Erdene has been working to deepen economic and trade ties with China, while also attempting to diversify Mongolia's economy and expand its ties with other nations, including the United States. Oyun-Erdene recently signed a memorandum of understanding with the US to collaborate on cultivating a supply chain of critical minerals and rare earth elements, which are crucial for the world's clean energy transition and abundant in Mongolia. In Washington last week, Oyun-Erdene participated in meetings with Vice President Kamala Harris, Secretary of State Antony Blinken, and Defense Secretary Lloyd Austin. He discussed cooperation regarding minerals, including copper, and signed an "Open Skies" civil aviation agreement with the US. Oyun-Erdene stressed the importance of maintaining balance in Mongolia's foreign relations and described the US as one of the country's most important "third" neighbors. He also emphasized that Mongolia does not see China or Russia as threats and hopes to develop new infrastructure deals with China to better link the Mongolian economy to transit routes and ports. Mongolia has significant mineral resources, including copper, uranium, and rare earths, and Oyun-Erdene sees the potential for the country's GDP to triple by the end of the next decade.
U.S. re-engagement with China reflects confusion of priorities
Nikkei Asia
The Biden administration is seeking to strike a detente with China to buy time to rebuild munition stocks and logistics for a potential major regional conflict with China over Taiwan. The US has had to make maximum use of diplomatic, economic and intelligence instruments due to its reduced military power and the resources being consumed by the conflict in Ukraine. However, this move is seen as an act of appeasement as China has not pulled back from any of its aggressive provocations, such as cyberattacks and threats to Taiwan.
Fourteen dead in floods in northeastern China
Reuters
Typhoon Doksuri has caused heavy rainfall and flooding in northeastern China, Beijing, and Hebei province. Fourteen people were reported to have died in the city of Shulan over the weekend due to the flooding. This adds to the more than 20 deaths that occurred last week in Beijing and Hebei. The overall death toll for the entire country has not yet been provided by authorities. Water levels in Shulan have receded and emergency response efforts are underway to relocate residents and repair infrastructure. Power has been restored to many homes in the affected areas. However, sections of the Songhua River and the Nenjiang tributary in northeastern China are still at dangerously high levels. Efforts to resume power in other northeastern provinces are ongoing.
Philippines summons China ambassador over boat incident
Deutsche Welle
The Philippines has summoned China's ambassador to protest against what it called Beijing's "excessive and offensive" use of water cannons to stop a Filipino supply boat in the disputed South China Sea. The US, Britain, the EU, and Australia have all condemned China's actions. China claims almost all of the South China Sea as its own, despite a 2016 international tribunal ruling against those claims. Trillions of dollars in trade pass through the South China Sea annually. The Filipino boat in the incident was delivering supplies and troops to the Philippine-occupied Second Thomas Shoal.
China not expected to push Russia return to Black Sea grain deal
Nikkei Asia
China appears to be content not to pressure Russia to return to the collapsed Black Sea Grain Initiative, despite the economic impact on China. The initiative, which allowed both Russia and Ukraine to export agricultural products globally despite the war, was launched in July last year but Russia withdrew a year later. China was the largest single recipient of these exports under the initiative, taking nearly one-quarter of Ukrainian shipments. However, experts suggest that Chinese President Xi Jinping is prioritizing geopolitical and national security considerations over economic concerns. China is seeking to build a coalition of autocratic states, including Russia, to counter US influence and losing Russia as an ally would weaken China's position in its contention with the West. China did not use its influence over Russia to persuade Moscow to remain in the initiative, indicating that it prefers the status quo and benefits from cheap Russian oil. China's only fear is that Russia might use nuclear weapons. While China may be interested in reviving the initiative, it is unlikely to join a pressure campaign against Moscow that is unlikely to have results. China is also aware that its losses are compensated by imports of agricultural products from elsewhere, including Russia. The collapse of the initiative has squeezed Ukraine's sources of revenue, and negotiations may only lead to a cease-fire rather than a resolution of the conflict. China will continue to portray itself as a potential mediator through its peace envoy for Ukraine's trips but is unlikely to take further action.
U.S. needs a team to counter China's political warfare: CSIS
Nikkei Asia
China's strategy of political warfare is on the rise, according to a report by the Center for Strategic and International Studies (CSIS). The report warns that the US and its allies have been slow to identify and counter Chinese political warfare, which includes tools such as disinformation, cyber operations, intelligence operations, and economic coercion. The report suggests that the US needs to increase resources and support to programs that provide technological and other assistance to individuals and organizations in China and break through the Great Firewall.
China tells Philippines to remove grounded warship in South China Sea
Reuters
China has told the Philippines to remove its grounded warship from the Second Thomas Shoal in the South China Sea. This comes after China blocked two Manila supply ships with water cannons over the weekend. The Philippines accused the Chinese coast guard of blocking and water-cannoning a Philippine military supply ship on what it said was a routine troop rotation and resupply mission on Saturday for the Philippine warship, a rusty World War Two-era American ship that a handful of troops live aboard. China said it had earlier told Manila not to send ships to the Second Thomas Shoal and not to send "construction materials used for large-scale repair and reinforcement" to the warship after it learned of this recent supply plan, the Chinese coast guard said in a statement on Monday. China also urged the Philippines to restore the Second Thomas Shoal and said it had allowed transport of daily necessities including food to the grounded ship, according to the Chinese statement, adding that it had used the water cannon to avoid collision from a direct interception.
Hong Kong stocks waver as traders reassess impact of China’s stimulus measures
South China Morning Post
Hong Kong stocks were volatile, fluctuating between gains and losses as investors weighed the impact of growth-stabilising measures in China's economy. The Hang Seng Index dropped slightly, while the Hang Seng Tech Index slid 0.3%. Investors remain concerned that the current stimulus measures will be insufficient in stemming the slowdown in growth.
Why China has few good options to boost its faltering economy
CNN
China's ability to stimulate its economy is limited due to its high levels of debt, according to analysts. While Chinese leaders have made promises to support the private sector and boost the economy, investors have been hoping for more tangible stimulus measures that are unlikely to come. China's economy has lost momentum since April and there are concerns that it may face a period of slower growth. There are signs of deflation and risk that China is entering a liquidity trap, where monetary policy becomes largely ineffective and consumers hold on to their cash. To get the economy back on track, Beijing needs to match its words with action, analysts say. Interest rate cuts alone are not enough; fiscal measures are needed to boost demand. However, China's debt problems have deepened during the Covid-19 pandemic and its outstanding government debts are estimated to have surpassed CNY123tn ($18tn) last year. Even if Beijing were to take action, it would be less effective than in 2008 and would increase China's already high levels of debt.
Chinese chip maker Hua Hong in strong debut on Star Market
South China Morning Post
Chinese semiconductor company Hua Hong Semiconductor made a strong debut on Shanghai's Star Market, opening at CNY58.88 ($9.12) per share, a 13% increase from its IPO price of CNY52. The stock jumped by as much as 15% in morning trading before settling at CNY54.86 at the break. The company raised CNY21.2bn by floating 408 million shares on the Nasdaq-style Star Market of the Shanghai Stock Exchange last month, 18% higher than its initial target due to strong demand.
China chipmaker Hua Hong opens sharply up in Shanghai debut after $3 bln offering
Reuters
China's second largest chip foundry, Hua Hong Semiconductor, saw its shares open 13% higher in its debut on Shanghai's STAR Market. The company raised $3 billion in China's largest public offering this year. Hua Hong's shares opened at 58.88 yuan, compared to its offer price of 52 yuan.
‘Clearly a concern’: Japan’s hardening China stance sparks regional unease
South China Morning Post
Japan has labelled China its "greatest strategic challenge" in a recent defence white paper. While analysts say this hardening position is "clearly a concern for Southeast Asia," they note that "behind closed doors" regional elites likely understand the approach. Japan has been closely communicating with Southeast Asian nations on its defence and security posture and is looking to mitigate any confrontation through multilateral engagement. The country also aims to double its defence spending by 2027.
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