Biden says frozen U.S.-China ties should ‘thaw very shortly’; Exclusive Insight: President Biden has made his concessions; now it's Xi Jinping's turn to manifest goodwill
What Needs to Happen for the Renminbi to Seriously Compete With the Dollar; China urges U.S. to meet it halfway, bring ties back on track; China’s New Covid Wave Set to See 65 Million Cases a Week
Welcome to this issue of The China Brief. Today is May 22, 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.
Exclusive Insight: President Biden has made his concessions; now it's Xi Jinping's turn to manifest goodwill.
President Biden has claimed that no Western leader understands Xi Jinping better than he does, but this historical rapport has not facilitated a smooth Sino-American relationship; in fact, it seems even more turbulent than the chaotic relationship during the Trump era.
The war of Russian aggression against Ukraine is far from resolution. A meticulously planned strategy to encircle China is taking shape, with President Biden himself as the chief architect. It's unclear whether this is the result of China's unfavorable portrayal in Western media, or the West's panic and anxiety in response to China's rapid rise. Either way, it's causing unease among those who have just begun to enjoy post-Cold War peace: a confrontation far more intense than the Cold War is brewing.
However, the situation has brightened in recent days: a G7 summit that was to address China has explicitly abandoned the idea of decoupling, and subsequent Quad meetings have also avoided overtly targeting China.
On Sunday, President Biden even optimistically told the world: Sino-American relations will improve soon. He also stated that the U.S. is considering lifting sanctions against China's Defense Minister Li Shangfu, paving the way for next month's Shangri-La Dialogue.
Don't be so naive; the relationship between China and the West still faces stormy seas. Perhaps there's some truth to British Prime Minister Sunak's assertion that "China poses the greatest security challenge globally," but it's not entirely factual. China does present a challenge to the Western-dominated world order, but it is not a global threat, nor necessarily a security one.
After World War II, the universal values promoted by the West have driven global development, but this order is not absolute in fairness or reasonableness. Despite China's account for 20% of global GDP, its values are far from global acceptance, and its strength is still far inferior to that of the United States.
Yet, people outside the West do not necessarily feel threatened in the same way Western politicians do. China does not represent the global South and doesn't have the ability to oppose the West, but it is part of the global South.
In fact, the global South often diverges from the West on critical issues, such as the Russo-Ukrainian war. While Western media portray China as close to Russia, Brazil's Lula has gone even further, asserting Ukraine also bears responsibility. India's Modi is more keen on reconciliation between Ukraine and Russia than Xi Jinping.
South Africa's position is closer to China's, and it is reconciliation groups that go to Europe. The suggestion by the prosecutor of the International Court in The Hague that South Africa would arrest Putin this August is purely sleepwalking.
No political force or consortium can manipulate the global South, and PR can't shape it. The South can't act in unison with the West, so the "global" that Sunak speaks of does not exist; the West is not the entire world.
Perhaps President Biden has realized that if a new Cold War occurs, the West may not be as successful as it was against the Soviet Union, because the global South is not a closed ideological camp, and neither is China. As US Ambassador to China Burns said, China's strength far surpasses the Soviet Union's. It's not just about trade and manufacturing power; more importantly, like the global South, China yearns for a change in fate. Historical burdens and real-world predicaments make it difficult for them to immediately meet Western civilization standards.
China is not blameless in Sino-American conflicts. President Biden is correct; the balloon incident was foolish. Of course, it wasn't a malicious provocation against the United States, but even if it was unintentional, China should offer a sincere apology and a clear explanation.
The chapter of the balloon incident has turned. President Biden's eagerness to meet or speak with Xi Jinping is sincere. His efforts to arrange a meeting between Li Shangfu and Secretary Austin are commendable. Xi Jinping should make friendlier concessions. Rather than meeting Biden in New Delhi or San Francisco, he could sincerely invite President Biden to visit China — not just Beijing, but also Urumqi.
(This article is written by Ho Pin, an analyst for The China Brief.)
What Needs to Happen for the Renminbi to Seriously Compete With the Dollar
Bloomberg
Chinese currency renminbi (RMB) is considered a contender to challenge the US dollar as the world's sole reserve currency given the size of the Chinese economy and its role in global trade. However, the currency is not suited for this purpose, and China would need to undertake several key actions to enable it to meet the international standards for a global reserve currency. Karthik Sankaran, a veteran in foreign exchange, said that a more multi-polar foreign exchange landscape could benefit world financial stability if it happens.
China urges U.S. to meet it halfway, bring ties back on track
Reuters
China's foreign ministry spokesperson has called on the US to have a better understanding of China and for the two countries to meet halfway to improve their bilateral relations. This comes after US President Joe Biden suggested that a change in the relationship between the two nations was possible.
China’s New Covid Wave Set to See 65 Million Cases a Week
Bloomberg
China may see up to 65 million Covid-19 cases a week peaking towards the end of June, according to the country's senior health adviser. XBB is fuelling this resurgence in cases, with an estimated 40 million Covid-19 cases expected by the end of May, before climbing to 65 million by the end of June, says respiratory disease specialist Zhong Nangan, providing rare insight into how the much-anticipated second wave may play out. Meanwhile, China is preparing to roll out new vaccines to target the latest omicron variants, including three vaccines that Zhong says will be cleared soon and will "lead the pack internationally in developing more effective vaccines".
Flaring tensions over G7 and Micron show limits to US-China reset
Financial Times
China has ordered its infrastructure companies to stop buying from Micron, the US chipmaker, shortly after US president Joe Biden called for a thaw in relations between the two countries. Chinese foreign policy analysts said the call maintained and exacerbated existing tensions. While experts do not expect the diplomatic conflict to derail high-level engagement efforts entirely, they suggest stabilization will be held up by issues of economic coercion, national security issues related to technology and worsening tension over Taiwan, as China tries to maintain its grip on Taiwan and the US looks to support Taiwan as a sovereign nation.
China’s Buying a Lot of Commodities From Russia, Just Not Wheat
Bloomberg
Though China is on track to be the world's largest buyer of wheat, Russia is failing to capitalise on the boom due to a range of issues. Firstly, phytosanitary regulations have put a block on imports. Transport issues are also playing a part; no rail connection exists between Russia and China's wheat-producing regions meaning the grain would have to travel nearly 1,000 miles by truck. Chinese officials have said they're working to improve the regulatory situation and there are hopes that the future of wheat and meat shipments will feature on the agenda when Russian government officials and executives attend a business forum in the country next week. Even if Russia manages to join the party, China's buying spree may be tapering off and analysts predict that China's total wheat imports will fall this year, with lower domestic prices and lower demand from the livestock industry.
China makes urgent plans to care for 400 million elderly
The Sydney Morning Herald
China has laid out steps to prevent a demographic crisis, calling for all provinces to construct a basic elderly care system by 2025. Beijing is grappling with a decline in population, and one of its biggest dilemmas is how to provide care to an increasingly ageing community. The National Health Commission in China predicts that the number of people age 60 and above will increase to 400 million by 2035, from 280 million now. The ruling Communist Party has been mobilizing resources to ensure that vulnerable age groups are cared for adequately as society ages.
Biden says frozen U.S.-China ties should ‘thaw very shortly’
Japan Times
US President Joe Biden has said relations between the US and China may begin to “thaw very shortly,” and has indicated that high-level talks could become more frequent. U.S Defense Secretary Lloyd Austin is expected to attend the three-day security conference, The Shangri-La Dialogue, which starts on 2 June. His Chinese counterpart, Li Shangfu, may also attend, as Beijing normally sends its defence minister to the forum. The Pentagon has been seeking such a meeting, but US sanctions on Li have emerged as a stumbling block. Biden said the issue of the sanctions was “under discussion.”
Chinese teams begin study of sunken Ming-era ships found in South China Sea
South China Morning Post
Two ancient merchant ships that were recently discovered in the South China Sea are being mapped and researched by the Chinese government. The shipwrecks are from the late 15th and early 16th century periods during China's Ming Dynasty and were both laden with cargo. Researchers expect that the discovery will bolster China's status as a maritime power and build the case for their territorial claims in the South China Sea, which are contested by the Philippines, Malaysia, Vietnam and Brunei. The discovery may also hold clues for Chinese traders participating in the Belt and Road Initiative.
Papua New Guinea, US to sign security pact with eye on China
Al Jazeera
Papua New Guinea is set to sign a defens agreement with the US as concerns rise about China’s growing influence in the Pacific. The US State Department said the pact would boost security and strengthen bilateral relations. It has raised questions about Papua New Guinea’s relation with China, an important trading partner, and the militarization of the region. Protests took place at several university campuses in the country. The US wants to shore up regional stability after Beijing signed a security pact with the Solomon Islands last year.
G7 struggles to win over nations courted by China and Russia
Japan Times
The G7 summit held in Japan did little to sway so-called global swing states in support of Ukraine at a time when China and Russia are also cultivating the nations. Brazil’s Luiz Inacio Lula da Silva, India’s Narendra Modi and Indonesia’s Joko Widodo, who oversee 25% of the world’s population, declined to endorse a G7 view of the conflict. A senior UK official saw the summit as a success, saying that the G7 had sought to establish a concerted effort to counter Russian and Chinese efforts to unify middle-ground states to build an alliance against the West.
Star analyst who predicted China reopening trade says another rally is imminent
South China Morning Post
Chief economist of hedge fund Grow Investment Group, Hong Hao, predicts that Chinese stocks will continue to rise, even if the US enters a recession. Hao believes that Chinese and risk assets will benefit from a brightening outlook brought on by China's manufacturing industry. The People's Bank of China would loosen monetary policies to counter the effects of a US recession, which would subsequently induce a "tearing rally" in the Chinese stocks. Confidence in China's stock market's recovery has decreased as economic figures fell under projected estimations, leading to sell-offs in the yuan.
‘Uncle Roger’ jokes about China and censors don’t see the funny side
CNN
Nigel Ng, a Malaysian comedian, has been barred from creating posts on China's Weibo social media platform, several days after predicting his skits on censorship would cause problems. Ng recently posted a trailer for his new show on Twitter in which he joked about China's surveillance state and urged the Communist Party not to "make him disappear." He is scheduled to release his full show via video on 4 June, the anniversary of the 1989 crackdown on democracy protesters in Tiananmen Square. Comedian Li Haoshi was fined $2m and banned from staging performances after making an army-related joke that prompted a backlash.
Does America Still Need Europe?
Foreign Affairs
The United States and Europe should shift their defensce priorities to address threats in Asia rather than Europe, according to an op-ed in Foreign Affairs. The rise of China and the intensification of the Chinese-U.S. rivalry have increased the risks of combat and the prospect of deterrence failure in Europe or Asia, wrote Emma Ashford, Joshua R. Itzkowitz Shifrinson and Stephen Wertheim. The US would gain little by being the primary security provider for European countries who could afford to fund their own defense against Russia. However, many policymakers in Washington believe that any significant US military drawdown from Europe would sever US ties with the continent and the world by validating China and Russia’s self-interested pictures of the US.
The US is not capable of conducting full-scale operations against China and Russia simultaneously, and acts as a primary security provider to European countries that can afford to fund their own defense against Russia. Transferring most of the responsibility for defending Europe to European states themselves would allow the United States to shift to a supporting role, wrote Emma Ashford, Joshua R. Itzkowitz Shifrinson and Stephen Wertheim. The European Union had a GDP more than nine times larger than that of Russia in 2021, even its much-maligned military spending is already almost four times greater than Russia’s, and it has roughly three times the population of Russia.
Russia cannot become a European hegemon, and the United States would remain a constructive NATO ally with a largely offshore troop presence, according to the article. If Russia were to attack a member of NATO, the United States would retain a spectrum of retaliatory options. In order to develop realistic policy options commensurate with the threat posed to US interests, Washington needs to gauge the Russian threat accurately, according to the authors.
Foreign Affairs
China's global port network provides the country with crucial power projection capabilities for its military, according to two defense analysts. China's dominant position in global port infrastructure has given rise to economic and strategic benefits, as the facilities are used to transport crucial commodities to and from the country and support global trade. However, the country's maritime industry also supports emerging signs of Chinese military power projection, with the People's Liberation Army regularly and reliably using Chinese-operated terminals to resupply and refurbish overseas naval forces. Observers say the international port network is now allowing China to project its military power far beyond its shores and will help the country to compete with the US on a global scale.
Macao casinos' reopening boost blunted by junket crackdown
Nikkei Asia
Macao casinos have seen a strong first quarter after China's COVID reopening, but doubts remain about whether the gambling hub can return to pre-pandemic revenue levels due to a crackdown on junkets that is keeping high rollers away. All six operators recorded positive earnings before interest, taxation, depreciation and amortization (EBITDA) in the three months ending March, with Sands China leading at $398 million.
Goldman Sees Little Respite for Yuan Despite PBOC Pushback
Bloomberg
Goldman Sachs has reduced its forecast for China's yuan over the coming three months, predicting that it will see more drops, reaching 7.1 to the dollar in the near-term, amid a combination of the trade war with the US and domestic policy moves from Beijing. Mitul Kotecha, head of emerging markets strategy at TD Securities, argued that China’s policymakers may benefit from a devaluation of the currency, given that it could fuel the economy, but added that this would only be a short-term effect. Other analysts are also anticipating the yuan to weaken further, with Citigroup eyeing up a decline to 7.2 USD on the back of weak economic data. Nomura, meanwhile, predicts an equivalent value by mid-July.
China summons Japan envoy to protest G7 statement; Tokyo counters
Japan Times
China has lodged a “solemn” protest on Sunday with the ambassador of Japan, Hideo Tarumi, over references to Taiwan in Group of Seven statements made at a summit in Hiroshima while Tarumi offered a counterargument. Beijing has expressed “strong dissatisfaction and resolute opposition” over the statements issued during the G7 summit hosted by Japan, claiming it has “grossly interfered in China’s internal affairs,” violated the basic principles of international law and harmed China’s sovereignty, security and development interests.
China holds lending rates, wary of weak yuan and capital outflow
Nikkei Asia
China's benchmark lending rates were left unchanged for the ninth consecutive month. Despite data indicating that economic momentum is subsiding following post-Covid growth, the People's Bank of China (PBOC)'s next policy move is expected to involve lowering bank cash reserves rather than cutting rates as a weakening yuan and yield differentials with the US leave little room for monetary easing. Analysts believe symbolic measures such as reserve requirement ratio cuts are more likely in 2023 given the pressure of RMB depreciation and a wide US-China interest rate differential. Easing bank cash reserves is expected to guide funding costs lower.
Chinese chipmakers' shares rise after China fails Micron in security review
Reuters
Shares in Chinese memory chipmaking-related companies have risen by between 3% and 8% after China placed a ban on products made by Micron Technology, citing a failure in network security tests. China's cyberspace regulator confirmed it would bar operators of key infrastructure from purchasing from Micron.
Brazil’s Lula ‘upset’ at not meeting with Zelensky at G7
South China Morning Post
Brazilian President Luiz Inacio Lula da Silva has expressed disappointment at not meeting with Ukraine President Volodymyr Zelensky at the G7 summit last week and accused Zelensky of showing no interest in negotiating peace with Russia. Zelensky had sought a one-on-one meeting with Lula, though scheduling conflicts were blamed for the failure to meet. Lula said he did not see the point in meeting Zelensky now, as he said that neither he nor Russian leader Vladimir Putin appeared to want peace, with both sides convinced they would win the war. Lula has been pushing for peace talks and has offered Brazil, along with other neutral countries such as China and Indonesia, as a mediator. Zelensky emerged from the summit with increased diplomatic support and new pledges of military aid.
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