US-China top diplomats plan meeting in Munich
ASML reported a former employee in China stole confidential information; Xinjiang chief cancelled European trip; Hundreds protest against medical benefits cuts; China announced new sanctions
Welcome to the latest edition of The China Brief, your go-to source for news and analysis on the latest developments in China. Today is Feb 16, 2023. ASML has reported that a former employee in China stole confidential information from a software system. The US and China are discussing a meeting at the Munich Security Conference to ease tensions following the US downing of a suspected Chinese spy balloon. Protests have taken place in China over recent changes to the national medical insurance program. US officials believe that the Chinese spy balloon shot down off the coast of South Carolina was originally supposed to conduct surveillance over US military bases. China's "military-civil fusion" program has been pushing for commercial businesses to help build a world-class military. Chinese authorities plan to develop policies to boost consumer spending and stimulate the economy. Finally, China has added Lockheed Martin and Raytheon Technologies to its "unreliable entities list" due to their arms sales to Taiwan, and the governor of Xinjiang has canceled his planned visits to London and Brussels after facing criticism from politicians and activists over the detention of around one million Uyghurs and other Muslim minorities in his region.
And here’s today’s expert view on the balloon saga:
The U.S.-China balloon spat exposes China's ambition in "near space," an ambition now tainted by politics.
How to develop aircraft in "near space" is Professor Wu Zhe's stated goal, and New York Times reporters have obtained valuable information on Wu Zhe. If anything, China is not even attempting to cover it up.
Washington recently sanctioned six Chinese companies, three of which were related to Wu Zhe. This suggests that Wu's research poses a threat to the United States: either it’s too dangerous or too far ahead.
Instead of becoming a political star like his contemporaries in aerospace, Wuzhe was at some point marginalized within the system. He has led several R&D projects at Beihang University, the military aresearch juggernaut. His position as a member of the military science and technology committee shows how much he is valued within the military system. The committee was formerly part of the General Armaments Department, which is home to some of the brightest scientists in the Chinese PLA and is the pinnacle of civil-military integration.
Colloquially, near space is a world between satellites (space) and aircraft (aviation), and Wu Zhe seems to believe that this space has unique advantages, for commercial, military and scientific research. Strictly speaking, what Wuzhe is developing is not a balloon as reported in the U.S. media, but an airship. The Chinese are not the only ones doing it, the U.S. and Russia are also in the running.
This is a poorly defined realm. Airships can be both military and civilian, something that leaves just enough vagueness for China and the United States to continue to spar over.
(This commentary was provided to “The China Brief” by Ho Pin, a veteran journalist and Chinese politics analyst. )
Bloomberg: ASML Stolen Data Came From Technical Repository for Chip Machines
ASML Holding NV, a crucial supplier in the semiconductor industry, has reported that a former employee in China stole confidential information from a software system. The stolen data came from a product life cycle management program known as Teamcenter, which is a shared storehouse of technical information used for collaborating and managing product development. ASML did not disclose what type of data was taken, but stated that the breach involved technological information, not hardware. This is the second breach by China that ASML has linked to China in less than a year. The US has been notified, and tensions are high as the US is pressuring other nations, including the Netherlands, to prevent China's chip-making abilities from advancing.
WSJ: U.S., China Diplomats See Chance to Clear the Air Over Balloon
US Secretary of State, Antony Blinken, and China’s top diplomat, Wang Yi, may meet at the Munich Security Conference this week, in an attempt to ease tensions following the US downing of a suspected Chinese spy balloon. The two sides have been discussing the possibility of a meeting, however, no decision has been made yet. Last week, the top State Department official for East Asia conveyed the administration’s interest in resuming diplomatic talks with China. The Biden administration has been trying to prevent relations with Beijing from deteriorating further. The conference will focus on Europe’s and Washington’s priorities, with Russia’s war in Ukraine set to be the main theme.
WSJ: Hundreds Protest in China as Government Cuts Medical Benefits
Protests have taken place in Wuhan and Dalian against recent changes to the national medical insurance program in China, which has resulted in cuts to the amount of money elderly citizens can receive for medical care. The changes aim to reduce reimbursements for medical care in exchange for an expansion of the range of outpatient medical services on offer. Some protesters called for the city leadership to resign, while others sang “The Internationale” and “Unity is Strength”. The protests come ahead of annual legislative meetings in Beijing where new fiscal policies are expected to be unveiled.
NYT: How a Fog of Questions Over a Spy Balloon and U.F.O.s Fed a Diplomatic Crisis
US officials increasingly believe that the Chinese spy balloon shot down off the coast of South Carolina in early February was originally supposed to conduct surveillance over US military bases in Guam and Hawaii, but winds carried it off course to Alaska, Canada, and finally the US mainland. Washington’s evolving view reflects difficulties in discerning each other’s intentions, which could lead to greater mistrust in an already fraught relationship or even to armed conflict. US officials are still trying to make a definitive conclusion on what the three unidentified flying objects shot down over North America were, but they now increasingly believe they were likely designed for scientific or weather research and had ceased to function, becoming akin to airborne trash.
NYT: Behind China’s Balloons, a Push for Business to Serve the Military
The recent controversy over China's high-altitude spy balloons has shone a light on China's "military-civil fusion" program, which aims to recruit commercial businesses to help build a world-class military to guard China's rise as a superpower. The Chinese government has been pushing for commercial businesses to provide faster access to commercial innovations while giving businesses contracts and military skills. US officials have expressed concerns about American goods or technologies sold through civilian supply chains could ultimately find military uses. The Biden administration has fortified the country's system of export controls to stop companies from sharing advanced technologies with China, and the administration has also placed several Chinese companies and a research institute that had supported military airship and balloon programs on a blacklist.
Reuters: China says to craft policies to boost consumer spending, improve child care
Chinese authorities plan to develop policies to boost consumer spending and stimulate the economy, including efforts to help the elderly, improve child care services, and encourage couples to have more children. These plans, announced by China's state planning body, finance and industry ministries, aim to unlock consumer savings and stimulate spending on housing. The government also plans to encourage private sector lending and attract more private capital to the market, while curbing hidden debts and preventing illegal and irregular debt raising. The announcements underscore a sense of urgency on the part of Chinese authorities to reinvigorate the economy, which slumped to one of its weakest levels of growth last year.
Nikkei: China sanctions Lockheed Martin, Raytheon over Taiwan arms sales
China has added Lockheed Martin and Raytheon Technologies to its "unreliable entities list" due to their arms sales to Taiwan, and banned them from imports and exports related to China, as well as further investment in China. The move comes after heightened tensions following the US military's shooting down of a Chinese spy balloon and Beijing's warning of "countermeasures against relevant US entities that undermine China's sovereignty and security." Neither of the US companies sell defense products to China, and it is not clear how China would enforce the imposed fines.
FT: Xinjiang governor cancels Brussels and London visits after outcry
Erkin Tuniyaz, the governor of Xinjiang, has cancelled his planned visits to London and Brussels after facing criticism from politicians and activists. The governor, whose region has seen the detention of around one million Uyghurs and other Muslim minorities, was due to meet officials from the UK and EU, but the trip to Brussels has now been cancelled, along with his visit to London. Last year, a UN investigation found evidence of “large-scale arbitrary detention” in Xinjiang, which has led to UK and European parliaments imposing sanctions on Tuniyaz's deputies. Tuniyaz himself is on the US Magnitsky sanctions list.