Chinese authorities raid US due diligence firm, arresting several staff members; Exclusive Insight: Zhejiang's rise to prominence
China’s new premier, Li Qiang, takes pro-private sector campaign on the road; U.S. Executives Will Keep Low Profile at China Forum Amid Tensions
Welcome to this issue of The China Brief. Today is March 24, 2023 . Here at The China Brief, We bring you the latest news on China's politics, economy, and society from global media sources and exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.
And here’s today’s exclusive insight:
Exclusive Insight: At the 20th Party Congress, a Zhejiang Native Becomes Premier
Zhejiang's prominence as China's economic hub began with the Reform and Opening-up policy. The era since the policy's initiation can be divided into three phases.
In the first phase, during the early 1980s, Zhejiang was marked by sub-par business practices, including smuggling and counterfeiting. Wenzhou exemplified these issues and faced public criticism and condemnation. Some leaders used Wenzhou as a cautionary capitalist example for rectification.
However, during this period, Shenzhen of Guangdong eclipsed Wenzhou. Some staunch communist officials visiting Shenzhen were reportedly so appalled, feeling their decades of revolutionary work were in vain as the country seemingly surrendered to capitalist tendencies. Compared to Shenzhen’s “notoriety”, Wenzhou's initial fame faded into obscurity.
The second phase began around 2000 and lasted for several years. Initially, Guangdong people were perceived as the wealthiest in the Reform and Opening-up era. However, this perception shifted to Zhejiang people. Zhejiang's tea, such as Longjing and green tea, gained popularity among Beijing residents who previously did not drink green tea. While Northerners preferred jasmine tea, Zhejiang people favored green tea over flower and black teas. Zhejiang cuisine and yellow wine also became fashionable in Beijing during this time.
We have now entered the third phase. At the 20th Party Congress, a Zhejiang native became the Premier. Among the Central Committee members, 17 hail from Zhejiang, a small province in terms of population and territory, which has once again captured widespread attention.
(This article is part of the series "Zhejiang, Zhejiang People, Zhejiang Economy," authored by Ye Feng, a Zhejiang researcher.)
U.S. Executives Will Keep Low Profile at China Forum Amid Tensions
Wall Street Journal
As tensions between Washington and Beijing escalate, multinational companies face increasing challenges to navigate the great-power competition. Over 50 CEOs and senior executives from the U.S. and other countries are expected to attend the China Development Forum in Beijing, with a mix of anxiety and caution. This apprehension reflects the deteriorating relationship between Beijing and multinationals, which was once mutually beneficial. Many corporate participants plan to maintain a low profile during the forum to avoid offending either Beijing or Washington. Western companies are reassessing their operations in China due to rising tensions and the impact of COVID-19 restrictions on supply chains. A recent survey by the American Chamber of Commerce in China found that only 45% of respondents considered China as their primary or among their top three investment destinations, down from 59% in 2019. Some senior Chinese economic officials have expressed concerns about losing foreign investors as the country's economy attempts to recover from the effects of COVID-19 isolation.
Ukraine Latest: China Pushes Its Cease-Fire Plan to More Leaders
Bloomberg
China has urged Europe to support its proposal for ending the war in Ukraine, which has been criticized by the US who said it would freeze the Kremlin’s territorial gains. President Xi Jinping hopes to build momentum for the blueprint by meeting with more dignitaries, including Brazil and Spain's leaders. Ukraine’s president recently addressed an EU leaders meeting in Brussels via video, urging them to convene a “Peace Formula Summit” and officials at the meeting have approved plans to send Ukraine one million rounds of ammunition within 12 months. Four MiG-29 fighter jets have been transferred to Kyiv from Slovakia, of a total of 13 to be donated by the EU nation.
China’s top diplomat has urged Europe to play a role in supporting peace talks between Ukraine and Russia and a political settlement, although the US has criticized Beijing’s recent blueprint, which it says would effectively freeze the Kremlin’s territorial gains in Ukraine’s east and south from the past year. Meanwhile, Zelenskiy, Ukraine’s president, has urged European Union leaders to hold a peace summit, and repeated his calls for long-range missiles and modern fighters jets, as well as faster delivery of weapons and ammunition already pledged.
Chinese authorities raid US due diligence firm Mintz
Financial Times
The Beijing offices of US due diligence consulting firm Mintz Group have been raided by authorities, who have detained five local staff and closed the company's China operations. The detention comes as international executives, including Apple's Tim Cook and Noel Quinn of HSBC, prepare for China's annual investor conference this weekend. According to sources, Mintz Group has not received a legal notice regarding the investigation, and the company is requesting that its employees be released. The security and intelligence company has also said it is prepared to work with Chinese authorities to resolve any misunderstandings that could have led to the raid. Mintz Group has always claimed it has operated ethically and in compliance with local laws and regulations.
Previously, China has detained journalists, analysts, and investigators with links to foreign companies. Following the arrest of CFO of telecoms Equipment maker Huawei, Meng Wanzhou, in Canada, two Canadians, Michael Spavor and Michael Kovrig, affiliated with the International Crisis Group, a research organization, were detained by Chinese authorities. In all three cases, those detained were eventually released. Relations between China and Western countries have been strained recently over issues ranging from allegations of espionage to political tensions.
UN chief says don’t isolate Beijing as EU discusses China, Ukraine, trade
South China Morning Post
The Heads of State and Government of the EU met in Brussels on Thursday, 25 March, to discuss a number of issues, with China featuring significantly in the discussion. The Secretary General of the United Nations, Antonio Guterres, urged European Union leaders not to isolate China, pointing out that such a policy could lead to the risk of China acting independently. The EU is currently amid issues relating to its dependency on China and has been taking steps to reduce its commodity exports to the country. However, while China's human rights record and economic policies have sparked concern, and its assertiveness on global issues is considered fundamentally significant, Guterres urged leaders to work on a friendly relationship. Following the meeting, Belgian Prime Minister Alexander De Croo commented that governments should continue to have a relationship with China and further advised they should talk about issues both sides agree on as well as issues they don't agree on.
Meanwhile, the conversation also turned to trade and the Comprehensive Agreement on Investment (CAI), a bilateral pact which was agreed but which has since landed itself in the deep freeze due to EU and China exchanging sanctions since March 2021. While some capitals have grown frustrated at the EU’s sluggishness in finalizing deals, pacts such as the CAI and a trade agreement with Mercosur continue to languish in limbo due to difficulties in securing political backing.
TikTok CEO Shou Chew issues stark warning on social media apps
Independent
TikTok CEO Shou Chew has told Congress that government devices should not have social media apps. Chew responded to the concerns of the US government, which has been seeking to ban TikTok over fears the Chinese Communist Party is using the app to spread propaganda and to collect user data for spying. The CEO appeared before Congress and denied such allegations, saying that no government device should have social media apps, not just TikTok. The app has already been banned in other countries, including in India where dozens of Chinese apps were banned over national security issues. TikTok has over 150 million users in the US.
US Navy challenges Beijing’s South China Sea claims, gets angry reaction
CNN
The USS Milius, a guided-missile destroyer of the US Navy, sailed through Beijing-claimed waters near the Paracel Islands in a “freedom of navigation operation” (FONOP) designed, according to the US 7th Fleet, to challenge the “restrictions on innocent passage” imposed by China, Taiwan, and Vietnam. The three nations all claim the Paracels, which are home to Chinese military bases. The US also challenged China’s claims to waters between the islands that were outside the internationally recognized territorial limit.
Tensions between China and the US over the South China Sea have intensified in recent years. The sea serves as an important shipping lane, as well as holding valuable resources such as fish, oil and gas. As much as a third of global shipping passes through the area, which was worth around $3.4tn in 2016. China conducts frequent military exercises in much of the Sea, and has a permanent presence of coast guard, and fishing vessels, which neighbors have said puts them at risk.
China reacted angrily to the presence of the USS Milius, with a statement from the Defence Ministry describing the operation as a “serious” and unlawful breach of Beijing’s sovereignty and security.
Hong Kong government announces measures to lure wealthy family offices
Reuters
The Hong Kong government has unveiled a series of measures in a bid to draw wealthy family offices to its financial hub, including revamped investment migration schemes, tax concessions, and art storage facilities. The move comes three years into severe Covid-19 lockdowns, as authorities seek to restore confidence and lure investors after a number of high-net-worth families and firms shifted base to international financial centres such as Singapore due to the national security law. Hong Kong is hoping to have attracted 200 large family offices by 2025.
Why China was the ghost at the EU’s summit banquet
Financial Times
EU leaders discussed China throughout their summit meeting, but it does not appear in the official record what was achieved or addressed in the meeting. The EU has to balance its relationship with China, which is a significant source of imported goods for the EU and its third-largest export market, against the strong pull from the US towards hawkishness on China, which is one of the few points of agreement between Democrats and Republicans. The US and EU are also concerned about military interference from corporate technology, and both are looking at rules to screen flow of corporate money toward China. Spanish prime minister Pedro Sánchez made clear his determination to continue engaging with China, announcing a state visit to Beijing shortly before the summit began.
Hungarian Prime Minister Viktor Orbán’s political director Balázs Orbán has criticized Germany's recent U-turn on phasing out combustion engines by 2035, which threw EU member states into disarray and opened it up to additional demands from other member states. The U-turn has angered some EU leaders who believed the deal had been agreed by member states and the European Parliament. Balázs Orbán has pointed to former German Chancellor Angela Merkel's ability to both ensure German interests and try to involve every country that is open to reaching a compromise during EU meetings, which current Chancellor Olaf Scholz is failing to do. Scholz struggles to control his coalition partners’ contrasting positions and is not filling Merkel's vacuum as the most potent voice around the EU table.
Man claims New South Wales Liberals rejected him as an election candidate on racial grounds
ABC
The leaders of the New South Wales Liberal Party, including Premier Dominic Perrottet, are being investigated for racial discrimination. A Chinese-Australian, Andy Yin, has filed a complaint about the rejection of his candidacy for the state legislature in Strathfield, which has a Chinese population four times the state average. Mr Yin claims the vetting committee raised unnecessarily harsh questions about his business dealings and subsequently rejected his candidacy without providing a reason. Mr Yin believes that the decision was racially motivated, and his complaint has been accepted by the Australian Human Rights Commission. The complaint is likely to cause further alienation of Chinese voters from the Liberal Party, which has campaigned to retain a hold on the state and federal legislatures despite discrimination claims.
Will US, India benefit from Nepal’s latest political shifts at China’s expense?
South China Morning Post
China could lose diplomatic influence in Nepal as a result of party reshuffling, while the US and India are poised to benefit, according to analysts. Nepal's ruling alliance's recent realignment saw former Prime Minister KP Sharma Oli's bloc, known for its pro-Beijing stance, relinquish power. Sher Bahadur Deuba's Nepali Congress, which is known for seeking closer ties to the US and India, stepped up to support the Nepal Prime Minister, Pushpa Kamal Dahal "Prachanda”. When both leaders formed an alliance in December, analysts predicted increased Chinese diplomatic input into the region. However, the alliance quickly failed and Deuba's party has taken power.
Despite the reshuffling, China's presence in Nepal appears strong, with high profile visits and the planned China-Nepal border railway. Chen Song, China's newly appointed ambassador to Nepal, had a series of meetings with political leaders including Dahal and Oli. Although Nepal would be likely to be more sensitive to India's concerns, it is thought that the new alliance led by Deuba will be unlikely to ignore Chinese investment.
Hong Kong Eases Listing Rules for Specialist Technology Firms
Bloomberg
Hong Kong Exchanges & Clearing has lowered its threshold for companies within “specialist technology” sectors to a market cap of HKD6 billion ($767m), down from the original notification of HKD8 billion. The lower threshold could help to revive Hong Kong’s IPO market, which fell 68% last year. Pre-commercial firms will also benefit, with a reduced required market cap of HKD10 billion. The head of listing at HKEX, Katherine Ng, received market feedback before making the changes. The new regime will come into effect on 31 March. The move is part of China's push for growth in tech companies within its own borders as the US implements broader restrictions, including limiting sales to Chinese clients.
Scandal-plagued China soccer hit by new corruption probes
Associated Press
The Chinese Football Association has suffered more corruption setbacks with corruption probes launched into the body's chiefs of competition and discipline. Two people are being investigated for violations of law and discipline, generally code for corruption. The announcement comes weeks after the Chinese Football Association’s former chairman was arrested on corruption charges. There is "little enthusiasm" for football in China, despite Chinese President Xi Jinping's calls to turn the nation into a footballing superstar. The domestic league has struggled considerably in recent years, particularly after the "zero Covid" policy offered little support for clubs. Despite winning numerous medals across disciplines at Olympics events, China has only competed in one football World Cup, over two decades ago. However, a selection of foreign players who have remained in China increases interest in the Super League competition in Europe.
Evergrande Creditors Still Face ‘Big Process’ on Restructuring
Bloomberg
China Evergrande Group has gained support from a group of dollar bondholders for its offshore debt restructuring plan. Evergrande is the world’s most-indebted developer and this announcement is a key step forward on what would be one of the nation’s biggest-ever restructurings. However, there is still a lot to be done. The language of the restructuring support agreements still need to be finalized and signed by the end of March. After that, the focus will shift to winning over a broader group of creditors.
Neil McDonald, a partner at law firm Kirkland & Ellis LLP, legal adviser to the group, said "convincing the other creditors is going to be the next part of our job. There will be a big process as we go through this." A successful debt restructuring is key to the builder’s efforts to push back an investor’s petition to wind up the firm. A resumption of trading would give creditors better insight into the value of Evergrande and its two listed units.
Los Angeles Overtakes Shanghai in World Financial Centers Ranking
Bloomberg
Los Angeles has overtaken Shanghai in the Global Financial Centres Index (GFCI), climbing to sixth place. Meanwhile, Boston and Chicago entered the top 10, with Beijing and Shenzhen moving lower in the rankings. The index lists New York and London as the two top financial cities. Singapore retained third place while Seoul entered the top 10 at number ten, with Paris dropping out. Responses from thousands of financial professionals in a questionnaire decide the rankings.
US Fights for Influence in Africa Where China, Russia Loom Large
Bloomberg
The Biden administration is stepping up efforts to build American influence in Africa amid rising competition with China and Russia. Vice President Kamala Harris is set to visit the continent, with stops planned in Ghana, Tanzania, and Zambia. She follows in the footsteps of Treasury Secretary Janet Yellen and Secretary of State Antony Blinken, who have visited Africa recently. President Joe Biden pledged a $55 billion support package for Africa in December at a summit with the continent’s leaders.
China is Africa’s biggest partner, with trade set to exceed $260 billion this year. It is also at the forefront of the battle to secure minerals critical to green energy. This includes cobalt and lithium, of which Africa has large supplies. US leaders are calling attention to the difficulty of paying back Chinese lending due to the steep price for borrowers. The US also seeks to increase lending to low and middle-income African nations via the International Monetary Fund.
Foreign Affairs
China's deterrence efforts have intensified despite the Biden administration's plans for "integrated deterrence" to combat Chinese aggression. China's approach, called "strategic deterrence," uses nuclear signals to dissuade potential enemies from intervening, and signals from China's rapidly expanding nuclear arsenal pose a danger to the region. China's perception of US decline, coupled with Russia's apparent success in limiting the US's support for Ukraine through nuclear threats, could cause China to become too confident and initiate a conflict that it believes the US will stay out of.
Washington must avoid evoking such an escalatory spiral by undermining China's confidence in its own capabilities. To out-deter China, the US must deliver an unambiguous message that any conflict between the two powers would outweigh any potential benefits of an armed reunification with Taiwan. If deterrence fails, both countries could become embroiled in a nuclear-armed war of great powers. The PLA is becoming more convinced of its military might as US power continues to appear more vulnerable; its nuclear arsenal is expanding while China's arsenal is becoming increasingly formidable.
The US approach to deterrence is different from China's in that it emphasizes coordination with allies, something that China lacks. The US works closely with Australia, Japan, the Philippines, and other Indo-Pacific countries on a range of security issues, and some of these countries could become directly embroiled in a Taiwan conflict, driving added military risks to Beijing. With China's nuclear upgrades casting a pall over the region, the US may double down on extended deterrence, whereby any nuclear strike on an ally would be treated the same as on the US homeland.
Philippines confronting Chinese diplomats over sea disputes
Associated Press
The Philippines has summoned Chinese diplomats over a series of aggressive moves by China in the South China Sea dispute, according to an official. The escalating conflict also involves the United States, where it is causing concern among officials. The most recent incident came on 6 February when a powerful military laser was fired at a Philippine coast guard ship. A Chinese delegation is holding talks in the area with Filipino counterparts, focusing mostly upon territorial disputes. Talks are continuing amid concerns that the US could suffer a major diplomatic and economic backlash and military warning from China ahead of two high priority international summits.
Washington has no claims in the South China Sea but it has dispatched ships and fighter jets in response to China's extensive claims in the region. In June 2020, the Philippines complained that the US should deliver on its commitments to Philipino forces amid rising Chinese aggression including sinking a fishing vessel after a collision with a Chinese fishing vessel. Filipino President Rodrigo Duterte abruptly ended the US military agreement that allowed US military personnel access to six designated areas for troop and equipment deployment in the Philippines last year. However, in January this year, the Biden Administration said that the US would further bolster its presence in Asia, citing “deep concerns with actions by China.”
China’s new premier, Li Qiang, takes pro-private sector campaign on the road
South China Morning Post
New Chinese Premier Li Qiang has reiterated China's plan to support the private sector and maintain an open-world approach. This was during Li's first trip as Premier when he visited the export hub Guangdong. He informed entrepreneurs in China and overseas of the government's intention to create a business-friendly environment and policies that would encourage advanced manufacturing growth. China has faced a series of challenges in recent months, including a weak economy, declining exports, and harsh regulations, which have impacted the major tech innovators in the country. As tensions have risen with the US, Chinese firms have not been granted access to US technology advances. Li urged businesses to shift the focus from production to innovation and from products to brands, promoting technology independence, Chinese creations, and Chinese products, thus moving away from "Made in China" to "Created in China".
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