China refuses to reschedule Blinken's Beijing trip; Exclusive Insight: Shifting Alliances: Russia, NATO, and Macron's Vision for a New European Order
China scientists carry out ‘rule-breaking’ AI experiment in space; China's new approach to Taiwan 'harder' to deal with; Australian back from China appears in court on foreign interference charge
Welcome to this issue of The China Brief. Today is April 15, 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.
And here’s today’s exclusive insight:
Exclusive Insight: Shifting Alliances: Russia, NATO, and Macron's Vision for a New European Order
Following the disintegration of the Soviet Union, Russia sought to establish friendly relations with the United States but was largely ignored. Consequently, Russia turned to the European continent in order to consolidate alliances for mutual support. This move was met with a positive response from Germany, particularly from then-Chancellor Angela Merkel. As a result, the European Union, led by Germany, provided funds and technology to Russia in exchange for energy and mineral resources, contributing to a prosperous coexistence on the continent. Economically, the EU as a whole had already surpassed the United States in strength.
NATO's eastward expansion began in the 1990s, after the collapse of the Soviet Union. Many former Soviet satellite states and republics, including Poland, Hungary, and the Czech Republic, were eager to join the alliance in order to secure their newly won independence and integrate with the West. However, Russia, still reeling from the dissolution of the USSR and its own loss of influence, perceived this expansion as a direct threat to its security and regional interests. This viewpoint was especially prominent during Putin's tenure, as he has repeatedly expressed concern over the alliance's activities along Russia's borders.
This encroachment on Russia's sphere of influence was seen as provoking the country's leadership, and Putin eventually referred to the expansion as a threat to Russia's very existence. This sense of vulnerability led to a shift in Russian foreign policy, focusing on consolidating its power in Eastern Europe and the post-Soviet space. As a consequence, tensions between Russia and Ukraine grew, culminating in the Russo-Ukrainian conflict. This military confrontation not only demonstrated Russia's willingness to use force to protect its interests but also exposed the fragility of the European security architecture.
Emmanuel Macron, a rising star in European politics, emerged with a political career far beyond that of Merkel and other predecessors. Now that the old guard has retired, Macron has taken the baton without hesitation. Germany, burdened by the guilt of two World Wars, has always acted cautiously and restrainedly. With the Nord Stream 2 pipeline recently bombed, Germany has remained silent and unwilling to confront the issue. France, however, is unencumbered by such historical baggage: despite the Vichy regime's capitulation to Hitler, Charles de Gaulle established "Free France" and fought against the Nazis. Thus, on EU matters, France is confident and unafraid of any trouble.
Macron himself has not only been a staunch supporter of the EU but has also proposed the establishment of a European army. Interestingly, one may speculate who is least receptive to this idea.
When the Russo-Ukrainian conflict erupted, Macron was among the first to offer mediation. The intricate historical context behind this is worth noting: Russia had previously occupied Ukraine, Poland had annexed parts of Ukraine, and Germany had invaded Poland on multiple occasions. Consequently, Poland harbors resentment toward Russia, with both Russia and Germany suffering. However, due to its geographical position, France is uninvolved in these complex relationships. Additionally, unlike the United Kingdom, France has never maintained hostile relations with Russia throughout history. As a result, Macron believes he can serve as an impartial mediator.
(From the series "Why Macron is Courting Xi Jinping", Part Two. The contributing author, Ma Ya, is the author of the Biography of Ma Hong.)
China scientists carry out ‘rule-breaking’ AI experiment in space
South China Morning Post
Researchers in China have given an artificial intelligence system full control of a near-Earth Earth observation satellite for 24 hours, for the first time. The AI, which used geomatics and information science from Wuhan University, did not require any human intervention, assignment or order during the time it had control of Qimingxing 1. It chose certain areas, among them the ancient Indian city of Patna, which was also the location of a deadly encounter between the Indian and Chinese military last year. Osaka in Japan, which occasionally hosts US naval vessels, was another of the locations chosen. The researchers suggested the AI could alert national security administrations, the military and other relevant agencies if it noticed unusual activity.
The team's AI, which was not capable of responding to conversations, required "a full understanding of the planet," according to the researchers. While the machine could detect natural and artificial objects, it needed to comprehend the relationship between these and the societies that interacted with them. Other experts have said projects such as China's plans for its 13,000-satellite constellation and Starlink’s expansion meant satellite operations would become difficult to manage without artificial intelligence to handle them.
China March new home prices rise at fastest pace in 21 months
Reuters
China's new home prices rose at the fastest pace in 21 months in March, according to official data. Policy support from the government has helped to maintain demand as China continues to push for an economic recovery. Prices rose 0.5% MoM in March, up from a 0.3% rise in February, marking the third consecutive monthly rise. However, the price of homes fell 0.8% YoY, falling for the 11th consecutive month. The property sector is a significant contributor to China's economy, with homeowners' loans jumping to CNY1.24tn ($180.52bn) in March, up from February's CNY208.1bn ($30.12bn), with medium- to long-term household loans also rising to CNY634.8bn ($92.38bn) from CNY86.3bn ($12.5bn).
China's new approach to Taiwan 'harder' to deal with: analyst
Nikkei Asia
China is using a combination of military and diplomatic tools to advance its interests and drive wedges, making it a more sophisticated and challenging player to deal with, according to China expert Bonny Lin. Lin was commenting on China's response to a meeting between Taiwanese President Tsai Ing-wen and US House Speaker Kevin McCarthy, which saw China show a display of force and employ diplomatic tactics.
Australian back from China appears in court on foreign interference charge
Reuters
China has been accused of trying to interfere in the affairs of Australia on various matters as per the latest arrest. Alexander Csergo, a digital and data marketing consultant living in Shanghai who has worked in China since 2011, was arrested late last week at a residence in the Sydney beachside suburb of Bondi. Court documents allege he was “reckless as to whether the conduct would support intelligence activities of a foreign principal, and a part of the conduct was covert or involved deception”. Police claim he was contacted to obtain information about Australia’s national security arrangements by two people later identified as working with a foreign intelligence service. It is the second instance in which an individual has been charged with violating Australia’s foreign interference laws, which criminalise helping other countries interfere with its national sovereignty or interest. The first case saw an agent of China charged with a similar crime. The case is the latest event in the ongoing tensions between China and Australia over trade and concerns about Beijing’s influence in the region.
Blinken starts Vietnam visit amid hopes of deeper ties to counter China
Reuters
The US and Vietnam are seeking to bolster ties amid rising geopolitical tensions in the region. In his first trip to the country as Secretary of State, Antony Blinken is meeting with Vietnamese General Secretary Nguyen Phu Trong and Prime Minister Pham Minh Chinh before heads of state from G7 nations meet in Japan's Ise-Shima region. Most countries in Southeast Asia are reluctant to antagonise China, which is both a military power and a source of investment. For Hanoi, the balancing act involves being open to US cooperation without upsetting Beijing. Vietnam has long been alarmed by China’s assertiveness in the South China Sea. The US will likely push for stronger ties with Vietnam, but Hanoi may not share this enthusiasm; analysts stress that there is no need for Vietnam to unnecessarily antagonise China. Blinken is also expected to raise concerns about human rights with Vietnamese officials; earlier this week a Hanoi court sentenced a political activist to six years in prison for conducting anti-state activities.
In Beijing, Brazil’s leader endorses China’s stance on Ukraine
Japan Times
China and Brazil have declared themselves as potential mediators to the conflict in Ukraine, stating that negotiations represent the only viable way to end the crisis. The leaders of each country, Xi Jinping and Luiz Inácio Lula da Silva of Brazil, made the comments in a joint statement following a meeting in Beijing. There were no specifics given about how the two nations could bring Russia or Ukraine to the table after more than 12 months of war. Lula gave his backing to China’s view on the subject, which does not call for Russia to withdraw its troops from the country. The Chinese government appreciates that Brazil recognises China’s “territorial integrity”, which includes Taiwan, despite no mention of Russian forces leaving occupied Ukrainian territory.
US and some European officials have criticised China’s 12-point outline of issues that should be considered as a peace agreement because it does not mention a requirement for Russian forces to withdraw as part of any deal. Brazil and China’s joint statement has been viewed outside of China as a move towards bringing Ukraine and Taiwan under the one-China policy, as Chinese leaders argue that Taiwan is part of a single Chinese nation. The leaders’ comments will be viewed as diplomatic support for the Chinese narrative that separates Ukraine and Taiwan.
China AI Stocks Frenzy Loses Steam as Earnings Doubts Creep In
Bloomberg
Companies involved in artificial intelligence (AI) are starting to lose momentum as investors await Q1 2022 financial results which could expose limited capabilities. Market players are starting to question if the earnings potential of AI firms justifies their rich valuations. Additionally, state media has called out signs of an AI stock bubble which has caused further backlash on the Chinese technology sector. SenseTime, the company that provides AI-powered facial recognition technology, has struggled this week as analysts are sceptical about their new product, which is a challenger to ChatGPT, and Kunlun Tech. has warned that its AI model needs a lot of investment and may only yield returns much later.
The losses are causing a lot of scepticism from investors, despite the CSI 300 Information Technology index having risen 29% this year, outperforming the MSCI China gauge, which has only gained about 4%. The IT gauge is trading around 27 times forward earnings, roughly the highest in two years. Analysts have said that this excitement was also driven by onshore mutual funds trying to deliver quick returns.
However, despite the scepticism, the rally can be sustained, so long as AI providers can deliver on their promises. Fund managers have said that AI remains a positive trade for the long term but that investors will become less tolerant if AI doesn't start contributing to the bottom line in six months' time.
China stalls Blinken’s Beijing visit over ‘spy balloon’ concerns
Financial Times
China is refusing to allow US Secretary of State Antony Blinken to visit Beijing over concerns that the FBI will release the results of an investigation into the downed suspected Chinese spy balloon. Four people familiar with the negotiations said China had told the US it was not prepared to reschedule a trip that Blinken cancelled in February while it remains unclear what the administration of President Joe Biden will do with the report. Chinese officials are concerned the Biden administration could release the FBI report along with physical evidence from the balloon, and that its findings could be made public during Blinken’s trip to China.
The FBI has been analysing debris salvaged from the balloon since it was shot down in February. The US says the craft was spying on sensitive military sites, but China says it was a weather balloon blown off course by weather. However, some officials want to declassify the evidence for public release to show that the balloon was conducting surveillance. Exacerbating the situation, China had also been reluctant to agree to a Blinken visit because of frustration that US lawmakers, including House Speaker Kevin McCarthy, met Taiwan’s President Tsai Ing-wen this month.
While the two sides fail to reach an agreement about a Blinken visit, there has been some engagement. Rick Waters, the top state department China official, recently visited Beijing and Cui Tiankai, a former Chinese ambassador to the US, visited Washington. In other areas, however, there has been almost no engagement. China “continues to decline requests for engagement with the secretary of defence, the chairman of the joint chiefs of staff, [Indo-Pacific commander] Admiral [John] Aquilino, and other senior department of defense officials,” said Martin Meiners, a Pentagon spokesperson.
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