MERICS Blog - European Voices on China en Outsourcing social services creates control dilemma for CCP <span>Outsourcing social services creates control dilemma for CCP</span> <span><span lang="" about="/en/user/646" typeof="schema:Person" property="schema:name" datatype="">jheller</span></span> <span>Tue, 11/20/2018 - 13:13</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-11-20T12:00:00Z">20/11/18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/matthias-stepan" hreflang="en">Matthias Stepan</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">China counts on non-state actors, from charities to private companies, for the modernization of its social service delivery systems. Given the CCP’s preference for maintaining operational and ideological control, this approach has limitations. This is the first of three articles based on a MERICS publication on social services in China.</span></strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-11/181120_village%20doctors%20medicine_LIC_imaginechina_pbu871482_03.jpg?itok=YqkFzZIA 325w, /sites/default/files/styles/max_650x650/public/2018-11/181120_village%20doctors%20medicine_LIC_imaginechina_pbu871482_03.jpg?itok=T51GMsyE 650w, /sites/default/files/styles/max_1300x1300/public/2018-11/181120_village%20doctors%20medicine_LIC_imaginechina_pbu871482_03.jpg?itok=uQCMkWlc 1300w, /sites/default/files/styles/max_2600x2600/public/2018-11/181120_village%20doctors%20medicine_LIC_imaginechina_pbu871482_03.jpg?itok=n2m2b-tt 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-11/181120_village%20doctors%20medicine_LIC_imaginechina_pbu871482_03.jpg?itok=YqkFzZIA" alt="Image" title="Attracting medical staff to work in remote places is only one of the challenges that the Chinese state faces in providing social services to its citizens. Source: ImagineChina." typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">In the 21st century, the Chinese government shifted focus from an almost exclusive obsession with economic growth and urban enterprise reform to “social development.” The aim is to close the gap between urban and rural areas, and between rich and poor. The inconsistent quality of social service delivery across localities or income groups is a deep-seated problem in China´s social system. Unequal access is another problem –the outdated urban residency (hukou) system, denies access to outsiders, making migrant workers and their families the most vulnerable social group in the Chinese system. </span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The Xi-Li administration counts on digital solutions (from tele-health to e-learning) to modernize the delivery of social services. The following two articles in this series (based on chapters of the MERICS publication <span><a href="">“Serve the people. Innovation and IT in China’s social development agenda”</a></span>) illustrate this approach in two sectors. Karen Fisher describes how digital technology has generated employment for disabled people. Barbara Schulte explains the more mixed results in Chinese schools, where the new technologies clash with traditional teaching methods and create a “digital divide” between producers and consumers of content.</span></p> <p><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Government signs up charities and companies</span></strong></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Faced with the enormous task of reforming China’s social service systems – from health care to education, from housing policies to poverty alleviation – the central government relies on direct provisioning only for guaranteeing a subsistence minimum for the neediest groups. At the same time, it has outsourced fundraising and implementation of digital and other innovative solutions to non-state actors from private companies to charitable organizations.</span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">This has created a dilemma for the CCP, which has a preference for maintaining operational and ideological control. The leadership addresses this by closely regulating and monitoring these non-state activities. Local governments experiment with <span><a href="">different contracting models</a></span>. New legislation on charitable organizations for example, encouraged the founding of new charities, but also increased political supervision.</span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">In 2015, the Central Committee and the State Council <span><a href="">mandated</a></span> state-owned enterprises (SOEs) to contribute to the fight against poverty. Three years later, 104 SOEs have contributed a total of 15 billion CNY to a <span><a href="">centrally managed fund</a></span>. 55 projects are already under way, reaching from modernizing agriculture, renovating run-down urban districts, over opening scenic remote areas for tourism to establishing new industries and industrial parks.</span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Private enterprises engage in projects through a program called, “ten thousand companies help ten thousand villages” (</span><span lang="ZH-CN" xml:lang="ZH-CN" xml:lang="ZH-CN">万企帮万村</span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">). Enterprises support the marketing of local products, sponsor educational activities or provide scholarships to students from remote areas. China’s tech giant Alibaba has<span><a href=""><span> </span>even established its own poverty relief fund</a></span>. </span></p> <p><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The state can delegate fundraising, but not implementation</span></strong></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Yet while raising finances is one thing, providing high-quality professional services is another. China struggles to attract staff to remote places or to improve working conditions, training and remuneration of staff in hospitals and care facilities, as well as educational institutions. </span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">It remains to be seen if the commercial and non-profit organizations can provide solutions to such complex issues in a strictly regulated operating environment that discourages bold initiatives. This is the control dilemma: the Chinese leadership tries to avoid direct social service provisioning beyond guaranteeing a subsistence minimum for the neediest groups. On the other hand, its preference for maintaining operational control stands in the way of outsourcing social service delivery.</span></p> <p><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The articles in this series are based on the MERICS Paper on China: “<span><a href="">Serve the people. Innovation and IT in China’s social development agenda.”</a></span></span></strong></p></div> </div> </div> Tue, 20 Nov 2018 12:13:49 +0000 jheller 8461 at Why closer Russia-China cooperation poses no direct threat to Europe <span>Why closer Russia-China cooperation poses no direct threat to Europe</span> <span><span lang="" about="/en/user/666" typeof="schema:Person" property="schema:name" datatype="">alehna</span></span> <span>Tue, 11/13/2018 - 17:19</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-11-14T12:00:00Z">14/11/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>MERICS Guest Author Marcin Kaczmarski</span></span></span></span></span></span></span></p> <p><span><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>The closer cooperation between China and Russia is unlikely to turn into a threat to the EU. Even with growing exports to China, Russia will still need the EU as a market for its oil and gas. China on the other hand, benefits from access to the European market and does not share Russia’s political goal to derail the European project.</span></span></span></span></strong></span></span></span></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-11/181114_Chinese_Russian_Flag_bjl225854.jpg?itok=Z57uXTQU 325w, /sites/default/files/styles/max_650x650/public/2018-11/181114_Chinese_Russian_Flag_bjl225854.jpg?itok=qN_AxBTR 650w, /sites/default/files/styles/max_1300x1300/public/2018-11/181114_Chinese_Russian_Flag_bjl225854.jpg?itok=akrz-KJK 1300w, /sites/default/files/styles/max_2600x2600/public/2018-11/181114_Chinese_Russian_Flag_bjl225854.jpg?itok=d1Ah6eKS 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-11/181114_Chinese_Russian_Flag_bjl225854.jpg?itok=Z57uXTQU" alt="Why closer Russia-China cooperation is not a threat to Europe" title="Image by ImagineChina" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>Russia has reinforced its ties with China over the last decade. The conflict with the West over Ukraine reaffirmed the Kremlin’s belief that closer cooperation with China was the right strategic choice. </span></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Russia has attempted to play the “China card” in its relations to Europe, but so far to little avail.</span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>The energy sector looked most promising. Moscow repeatedly (</span></span></span></span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><a href="">for the first time in 2006</a></span></span></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>) threatened to reroute its gas exports from Europe to China in an attempt to secure better deals with its European customers. However, Russian gas exports to China have so far been limited to </span></span></span></span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><a href="">small amounts of LNG</a></span></span></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>. The Power of Siberia gas pipeline, currently under construction, is going to be supplied from gas fields that are not used for export to Europe. The Altai gas pipeline, which would have to rely on the western Siberian gas fields that are used to supply Europe, remains unfeasible, even though both countries still refer to it in their joint communications. Russia’s energy policy is a bluff that the EU can easily call. </span></span></span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>The situation in the security realm is a bit different. China’s participation in the joint naval exercises with Russia </span></span></span></span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><a href="">in the Baltic Sea</a></span></span></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span> (2017) was an undeniable, even though symbolic, success for Moscow. Beijing legitimized aggressive behavior of Russian air and naval forces in the region. In no case does this, however, mean that China would join Russia in the latter’s attempts to use force against European states.</span></span></span></span></span></span></span></p> <p><span><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>Europe is a key economic partner for China</span></span></span></span></strong></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>In their political relations with the European Union, Russia and China have in common that they both prefer to deal with individual European states rather than with the EU as a whole. Russia’s and China’s attitudes and expectations towards the EU, however, differ significantly. <span><span>Beijing draws numerous benefits from the access to and ties with the EU. Unlike Russia, China is not interested in derailing the European project.</span></span></span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>The Kremlin sees the European project as <span><span><a href="">in decline</a></span></span> and willingly cooperates with anti-EU political and societal forces throughout Europe. The Russian elite does not hide its disdain for the EU and its underpinning ideas. China, in turn, regards the EU as a key economic partner, the source of technologies and the destination <span><span><a href="">of its investments</a></span></span>. The EU’s relevance for China has only increased since the beginning of the Sino-American trade war. </span></span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span>Russia is not able to replace Europe’s economic relevance for China, which consists of providing cutting-edge technologies, a place to invest or a market for Chinese goods. </span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Consequently, Beijing remains interested in the success of the European project. It would be difficult for Russia and China to agree on joint policy that would undermine the EU.</span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>Moreover, China has no interest in worsening relations between Russia and the EU. Functioning Russian-European relations are relevant for the development of China’s flagship foreign policy project, the Belt and Road Initiative. The transit corridors through Russia and Central and Eastern Europe offer the cheapest and fastest way for China to reach Western European markets. As the Russian-Western conflict over Ukraine demonstrated, instability narrows down Beijing’s options and slows down <span><span><a href="">the implementation of the BRI</a></span></span><span><span>.</span></span> </span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span><span>The railway connection through Ukraine was frozen because of the Russian-Ukrainian conflict, and Chinese plans to construct of a deep-sea port in Crimea had to be cancelled following the annexation by Russia.</span></span></span></span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Under such circumstances, Europe might even expect China to be a stabilizing force vis-à-vis Russia. The growing asymmetry between China and Russia may turn out conducive to Europe’s interests in the long-term.</span></span></span></span></span></p> <p><span><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>China and Russia support non-democratic forces</span></span></strong></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>While close cooperation between Russia and China has limited direct implications for Europe, it still may impact the EU indirectly. Sino-Russian cooperation can harm Europe’s interests in the liberal international order. Moscow and Beijing are eager to support non-democratic regimes. Vladimir Putin is ready to take risks and sees its modernized military as a way to conduct “gunboat diplomacy.” Xi Jinping prefers the “checkbook diplomacy.” Beijing is propping up non-democratic regimes with <span><span><a href="">financial aid</a></span></span>, and by encouraging Chinese companies to look for opportunities in the developing world.</span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>The problem for the EU is that it cannot match either. As the case of the Syrian civil war illustrated, it is difficult European democracies to push back against the Putin-backed regime because they have to consider civilian casualties. And unlike China, EU states cannot and do not want to offer money with no strings attached to the developing world.</span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span>This authoritarian challenge should worry Western leaders. But, at least for now, Europe needs not fear Sino-Russian collaboration directed against its security and economic interests. As long as China benefits from a unified Europe, it will not join Moscow in undermining European unity.</span></span></span></span></span></span></span></p> <p><span><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><span><span>Marcin Kaczmarski is an expert on Russia-China relations and a lecturer at the School of Social and Political Sciences at the University of Glasgow. The author is solely responsible for the content of this article. He can be reached at</span></span></span></span></span></strong><strong> </strong><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span><a href=""><span></span></a>.</span></span></span></strong></span></span></span></p></div> </div> </div> Tue, 13 Nov 2018 16:19:28 +0000 alehna 8446 at "The CCP sets the criteria for China's credit rating 'plus'" <span>&quot;The CCP sets the criteria for China&#039;s credit rating &#039;plus&#039;&quot;</span> <span><span lang="" about="/en/user/301" typeof="schema:Person" property="schema:name" datatype="">smuscat</span></span> <span>Fri, 11/02/2018 - 16:05</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-11-02T12:00:00Z">02/11/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>Interview with Mareike Ohlberg (via <a href="">Young China Watchers</a>)</strong></p> <p><strong>The collection of citizens' personal data is a global issue, but China's social credit system is unique in its ambitions. Its uses range from assessing individual credit risks to forcing companies to comply with environmental standards, but also to discouraging dissenting political opinions. In this interview MERICS researcher Mareike Ohlberg describes China's struggle to define the standards for a nationwide system.</strong></p></div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><img alt="Mareike Ohlberg" data-entity-type="file" data-entity-uuid="257e8e26-8e4f-49c5-8167-86129f5c9c0b" height="179" src="/sites/default/files/inline-images/Mareike_Ohlberg_press_klein.jpg" width="268" class="align-left" /></p> <p> </p> <p> </p> <p> </p> <p> </p> <p> </p> <p><strong>YCW: In your report “<a href="">Central Planning, Local Experiments: The Complex Implementation of China’s Social Credit System</a>,“ you refer to China’s system as “Credit Rating ‘Plus’.” How is China’s social credit system, both in its current state and in its projected scale, unique from systems in other countries? </strong></p> <p><strong>MO:</strong> China’s social credit system is unique in some ways but also overlaps with what’s happening in other countries. In the present stage, much of what is going on at the central level with setting up the social credit system really is about collecting data from a broad variety of sources. China certainly is not the only nation that wants to aggregate data on citizens and compare that data in areas such as tax departments and banks. There are experiments going on elsewhere: In India, the Aadhaar Card is an attempt to tie data from different sources to a single identity; in the Netherlands, the System Risk Indication of the Ministry of Social Affairs and Employment is used to identify citizens who might be abusing the social system.</p> <p>Even though China might be unique in terms of its ambitions for the social credit system, data collection and using data to rate people is more of a global issue.Take financial credit ratings: Germany has the <em>Schufa</em>, a private company that assesses the credit risk of individuals and certain sectors. The algorithm for how your <em>Schufa</em> score is calculated is not transparent, and that is problematic in and of itself.</p> <p>At the national level in China, there is no comprehensive citizen score, so it’s hard to say what the nationwide social credit system will look like in the end. But what can be safely said is that the social credit system in China isn’t just about assessing credit risk, even though that’s where part of the initial thinking behind the system comes from. But the way it has evolved now it has become more a tool to enforce potentially all laws, regulations and targets more effectively. Presently, it’s used to try to force companies to comply with environmental laws or production safety standards and to make debt defaulters repay the money they owe, but it can and has also been used to threaten those who don’t use Beijing’s preferred nomenclature on Taiwan. Hence the idea of credit rating “plus” or rather “plus plus plus.”</p> <p><strong>YCW: Can you talk about the positive and negative implications of China’s social credit system on parts of society, such as the economy and institutions like schools and hospitals? </strong></p> <p><strong>MO:</strong> At the most basic level, the idea of the social credit system is to enforce laws or regulations or any other target that the government wants to set. It can have a positive effect in, for example, creating strong incentives for companies not to violate environmental regulations, or ensuring protective measures against food scandals like China has faced in the past. But the problem is that you are trusting the government with setting the criteria. It’s hard to preclude political criteria—it can be used against those who “endanger national security,” those “picking quarrels and stirring up trouble” or those “violating national unity.” It places a lot of trust in the Communist Party of China (CPC).</p> <p>In terms of citizen affirmation, all you need is people not to be up in arms about it. At present there is not a lot of backlash, probably because there are no visible negative effects outside of a small number of people who are affected, such as being blacklisted for defaulting on debt. So long as the CPC succeeds in keeping the number of people severely affected relatively low, there’s a good chance there won’t be a lot of backlash.</p> <p>Here in Germany, there might be some vague sense that Facebook is doing stuff with our data that we may not be fully comfortable with, since that’s been in the news, but in the end, the convenience of connecting with friends wins out, and most people will keep their Facebook account.</p> <p>As well, it’s very hard to organize in China. Part of the reason Europe has a fairly good track record with data protection is that people can organize. Even if the majority of people aren’t willing to take action, NGOs, watch groups or lawyers push for certain laws, whereas there’s more limited space for that in China. Pushing for a law to curb data use and abuse by the central government, for example, would be very hard to achieve. There is a data protection discourse in China and a legal regime around data protection forming, in part inspired by and based on the EU General Data Protection Regulation (GDPR), but we will have to see how it is implemented, and in any case, that offers no protection from the government itself.</p> <p><strong>YCW: You note that the central government presents the social credit system as a “cure-all” for many of China’s current and future problems, including issues from food security to intellectual property rights. How does the state go about purporting that image, and to what extent is the Chinese public aware of the social credit system in its current form? </strong></p> <p><strong>MO:</strong> There is some media reporting on the system in China, which usually is either very positive or addresses issues that need to be overcome, like implementation hurdles. <a href="">Credit China</a> is the main system to look up official information about it. There are great cartoons on there that explain how it’s going to solve all problems with dishonesty, some of them quite disturbing in their unabashed support for public shaming. There is also some advertising the system in public spaces, especially in experimental zones where it is already being implemented.</p> <p>When I first started researching this, most people I spoke to in China didn’t know about it, whereas now it seems that almost everybody has heard of it and knows there’s something going on, whether from domestic coverage or reading international news.</p> <p><strong>YCW: Your research focuses on the gap between central government leadership and provincial government actors, who in many cases are the people charged with implementing the system. Are those disparities coming from ideological disagreements, differing understanding of what the system seeks to achieve, or merely the wide range of interpretations individuals might have of their role? How might this lack of unity complicate or threaten the social credit system? </strong></p> <p><strong>MO:</strong> The idea behind our study was not necessarily to point towards the discrepancies between the center and localities, but rather to give a more nuanced overview of the current state of social credit implementation in China. You have certain initiatives at the center, focused on centralizing data and making sure data is accessible to the central government. Then you have pilots. For instance, at the beginning of this year, the center picked 12 cities out of a list of cities that were in other kinds of pilot groups before, and promoted them as model cities for setting up the social credit system.</p> <p>Then there are a number of other initiatives being tested. It’s a complex undertaking, but at least in initial media reporting on the issue, the social credit system as a whole was often conflated with 芝麻 (<em>zhima</em> “Sesame”) credit, a commercial pilot run by Alibaba’s Ant Financial Services. It’s an interesting program and Alibaba is obviously a big player in big data, but use of Sesame Credit is not mandatory and government-led. In fact, the PBOC has refused to give Ant Financial Services a license. So my co-authors and I wanted to talk about these complexities in the implementation process. Government-led citizen rating, in those pilot cities where it does exist, is being carried out differently in different places. Some focus more on digital behavior, some are transparent with a catalog of behavior, and in other places people have no idea what might be impacting their score.</p> <p>This is not unusual for China, where experimental zones are a key part of how policy is made. Different models are tried in different places; they’re testing what works and what causes backlash; and if something is seen as successful, it’s rolled out more widely. In the paper, we’re not trying to make a statement that there’s a huge discrepancy between the central and local governments, but rather emphasize that it’s a long process.</p> <p><strong>Interview by Johanna M. Costigan</strong></p></div> </div> </div> Fri, 02 Nov 2018 15:05:13 +0000 smuscat 8411 at China’s battery industry is powering up for global competition <span>China’s battery industry is powering up for global competition</span> <span><span lang="" about="/en/user/306" typeof="schema:Person" property="schema:name" datatype="">komprakti</span></span> <span>Tue, 10/23/2018 - 14:39</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-10-24T12:00:00Z">24/10/18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/anna-holzmann" hreflang="en">Anna Holzmann</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong><span><span><span><span><span>China’s electric vehicle (EV) battery industry is well positioned to be competitive in global markets. The industry’s strong performance results from state support of domestic manufacturers. As China’s EV battery manufacturers expand abroad, manufactures in free market economies are up against Chinese state-backed competitors.</span></span></span></span></span></strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-10/181024_Electric%20vehicles_Focus_Battery%20Industry.jpg?itok=CVATkfWh 325w, /sites/default/files/styles/max_650x650/public/2018-10/181024_Electric%20vehicles_Focus_Battery%20Industry.jpg?itok=l-HId8ly 650w, /sites/default/files/styles/max_1300x1300/public/2018-10/181024_Electric%20vehicles_Focus_Battery%20Industry.jpg?itok=6cWy2NkR 1300w, /sites/default/files/styles/max_2600x2600/public/2018-10/181024_Electric%20vehicles_Focus_Battery%20Industry.jpg?itok=3Oq9CmJv 2500w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-10/181024_Electric%20vehicles_Focus_Battery%20Industry.jpg?itok=CVATkfWh" alt="Battery Industry" title="Chinese producers of electric vehicles&#039; batteries are holding a front-row position as suppliers. Source: ImagineChina" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span><span><span><span><span><span><span><span><span>Until recently, Tesla’s and Panasonic’s joint gigafactory in Nevada was the global benchmark for producers of lithium-ion batteries – the most common type of battery for electric vehicles (EVs). The US plant is currently capable of producing 20 gigawatt-hours (GWh) per year. In June, Tesla announced to further increase its production by setting-up a combined automobile-and-battery factory in Shanghai.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span>Chinese producers are rapidly catching up. China’s leading battery producers, Contemporary Amperex Technology (CATL) and Build Your Dreams (BYD), are planning to compete with their own gigafactories. If China’s expansion plans materialize, its battery manufacturing capacity would be more than triple than that of the rest of the world.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span><a href=""><img alt="China is building up massive battery manufacturing capacity" data-entity-type="file" data-entity-uuid="5fe93897-7f26-4166-8052-fc9eef7e1b7f" src="/sites/default/files/inline-images/181012_Economic-Indicators_Battery-Industry_Infographics_Q3-2018_finalfinal1_1.jpg" /></a></span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span>The development of the battery market is closely linked to the booming EV industry. Global sales reached a peak last year and are expected to further increase in the next decade. The race is on: for car makers to secure preferential supply with batteries, and for battery manufacturers to assume global leadership. With the aid of state support, Chinese companies have made a head start.</span></span></span></span></span></p> <p><span><span><span><span><span><span><a href=""><img alt="The global EV battery market is dominated by Chinese companies" data-entity-type="file" data-entity-uuid="049706e7-dbc1-49b0-a6dc-4a6e91fd7ff2" src="/sites/default/files/inline-images/181012_Economic-Indicators_Battery-Industry_Infographics_Q3-2018_finalfinal2_0.jpg" /></a></span></span></span></span></span></span></p> <p><span><span><strong><span><span><span>State intervention benefits Chinese manufacturers</span></span></span></strong></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span>Given the market size, a strong foothold in the Chinese battery industry translates into a front-row position in the global field. State intervention, however, has also benefitted Chinese manufacturers. The market is increasingly concentrated in the hands of a few Chinese companies. By June, the combined market share of the two EV battery behemoths CATL and BYD reached 64 percent – a considerable portion, given that China’s top ten battery manufacturers together hold a domestic market share of about 87 percent.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span>Last year, only six out of 98 battery (component) companies operating in China were foreign. One of the main reasons for this is China’s certification scheme. Since 2015, the Ministry of Industry and Information Technology has cleared 57 general EV battery manufacturers for business in China. They are virtually all Chinese. Many foreign companies were reportedly denied inclusion in the official list of certified battery producers on dubious grounds, suggesting that foreign companies had to adhere to different standards..</span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span>Despite this, foreign battery producers have started to break into the Chinese market– often in form of joint ventures – ownership restrictions were abolished last year. Yet, industry regulations and governmental support have long shielded the domestic industry from foreign competition.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span>In 2016, for example, Beijing issued draft regulations that did not explicitly discriminate against foreign companies. But the regulations nevertheless created a competitive advantage for Chinese producers. The regulations call for the construction of annual output capacity of eight Gigawatt hours (GWh) for lithium-ion battery manufacturers active in China. At first, only CATL and BYD could meet this criterion. Demand for their products was further artificially boosted, since EV subsidies would only be granted for cars using batteries from companies that met the stipulated requirements.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span>Changes in the regulatory scheme also drained demand for batteries from LG Chem. The Korean company was put in a predicament that allegedly led to the sale of the company’s Nanjing battery plant – including the rights to use its manufacturing technology – to Chinese auto manufacturer Geely in April last year. LG Chem, however, has already announced plans to establish a new factory in Nanjing.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><strong><span><span><span>Plans for battery industry are in line with Made in China 2025</span></span></span></strong></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span>Allegations of preferential treatment are substantiated by the state-set goals for China’s battery industry. Already back in 2012, the Chinese government stated that two to three leading battery companies with a capacity of ten Gigawatt hours should be brought about by 2020. These ambitions were revised upward to 40 GWh for “leading companies of international competitiveness” in the EV battery industry action plan released last year. These ambitions tie in neatly with the Made in China 2025 industrial policy, which seeks to boost domestic capabilities at the expense of foreign actors and lists EVs as a core industry. The strategy also regards batteries as a key domain for accelerated development. A minimum of 18 EV battery-related smart manufacturing pilot projects were set up since the release of the policy three years ago. Unsurprisingly, they are almost exclusively carried out by Chinese companies.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span>To cement their supremacy, Chinese battery manufacturers also count on fellow Chinese companies’ support. Last year, for instance, CATL formed two joint ventures with automobile company SAIC Motor. It also entertains strategic relations with other firms such as Dongfeng Motor. The Optimum Nano Innovation Alliance represents another type of initiative that ties together key domestic (read “Chinese”) players across the value chain of EV battery production. Acquisitions of foreign companies and inbound transfer of technology to build up a strong Chinese industry have become relatively scarce. The recent business activities of China’s top five battery manufacturers conform to an expansionist strategy of self-confident actors that started out to conquer the world battery markets.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span>The case of China’s battery industry shows how government supported demand for EVs and protectionist policies led to a thriving domestic market that has produced national, and increasingly global champions. It serves as a model case of China’s state-led approach to emerging industries that puts free market economies to the test. CATL’s plan to open </span></span></span></span></span></span></span></span></span></span></span></span><span><span><span><span><span><span><span><span><span><span><span><span>its first battery plant overseas in Germany in 2022 is a case in point. This time, a Chinese company will be introducing key technology to Europe, and not the other way around. More and more Chinese battery manufacturers are set to follow suit with their own plans to venture into Europe.</span></span></span></span></span></span></span></span></span></span></span></span></p> <p><strong><span><span><span><span><span>The article is part of<a href=""> the latest issue of the MERICS Economic Indicators, </a>a project monitoring China's economic development.</span></span></span></span></span></strong></p></div> </div> </div> Tue, 23 Oct 2018 12:39:24 +0000 komprakti 8371 at Chaotic markets meet uninformed investors in China’s online finance sector <span>Chaotic markets meet uninformed investors in China’s online finance sector</span> <span><span lang="" about="/en/user/306" typeof="schema:Person" property="schema:name" datatype="">komprakti</span></span> <span>Fri, 10/19/2018 - 15:44</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-10-22T12:00:00Z">22/10/18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/maximilian-karnfelt" hreflang="en">Maximilian Kärnfelt</a>, <a href="/en/team/kristin-shi-kupfer" hreflang="en">Kristin Shi-Kupfer</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><span><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Unrest over Chinese online financing platforms shows that the combination of unregulated market forces and uninformed individual decision making can lead to undesirable outcomes. Unless the CCP is willing and able to foster comprehensive reforms, events might again spiral out of control when new innovative financial solutions are introduced.</span></span></strong></span></span></span></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-10/181019_p2p_smartphone_app_pbu728966_23.jpg?itok=RiyIyY24 325w, /sites/default/files/styles/max_650x650/public/2018-10/181019_p2p_smartphone_app_pbu728966_23.jpg?itok=mIsqg8C6 650w, /sites/default/files/styles/max_1300x1300/public/2018-10/181019_p2p_smartphone_app_pbu728966_23.jpg?itok=UVdSAt-b 1300w, /sites/default/files/styles/max_2600x2600/public/2018-10/181019_p2p_smartphone_app_pbu728966_23.jpg?itok=_A30i9o_ 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-10/181019_p2p_smartphone_app_pbu728966_23.jpg?itok=RiyIyY24" alt="Hexindai P2P Investment App User" title="Between 2014 and 2018, the number of Chinese online financing platforms such as &quot;Hexindai&quot; grew from 651 to 1594. Image by ImagineChina. " typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Online finance platforms in China have come under pressure after a series of scandals ranging from defaults to frauds. In August 2018, police broke up a demonstration in Beijing organized by investors who had lost money invested in high-risk, high-return online finance platforms such as P2P lending and various wealth management products. It was not the first outbreak of social unrest in reaction to the lending practices of these providers. </span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Chinese policymakers are slowly waking up to the threat that the country’s widely unregulated online finance sector poses to the financial system – and to social stability. The scandals involving China’s risky online funds illustrate the difficulty of allowing market elements free reign in an otherwise highly regulated environment.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Valued at 1.3 trillion CNY (some 163 billion EUR), China’s online finance sector has grown to become the world’s largest. China is also the home to the world’s largest money market fund, Alibaba’s Yu’e Bao. Between 2014 and 2018, the number of online financing platforms in the market grew from 651 to 1594, according to Online Lending House, a research group that tracks the industry.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>The rapid growth of the sector has many causes. Online financial products often guarantee higher returns than the products offered by banks (see MERICS blog “A Financial Pressure Cooker”). They are also quickly gaining popularity in rural areas with limited access to banking services. The lack of alternatives led many in the middle class to invest enormous sums – only to find out later that the owners of these platforms embezzled or lost their money.</span></span></span></span></p> <p><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Government support helped spur the growth of the online finance sector</span></span></strong></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>The Chinese government has supported fintech and online finance as future growth engines. The state banking system has been bad at financing smaller enterprises, something government officials often complained about publicly. The hope was that online financing vehicles would help improve the allocation of capital and generate funding for small and innovative businesses.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>A famous example of implicit government support was the online fund Ezubao, which advertised on CCTV before the evening news and even held its annual meeting in the Great Hall of the People. The fund was eventually revealed to be a Ponzi scheme, which led to protests in 34 cities.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Further support has come through positive statements from government agencies. Both the State Council and what was then known as the Banking Regulatory Commission have, in the past, released statements supportive of online finance.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>The case of the Ezubao fund was far from unique. According to the Financial Times, problems with 150 online lending platforms were reported this year in June alone, ranging from refusing withdrawals to police investigations of embezzlement. In some cases, the owners even disappeared. Throughout all of 2017 there had only been 217 similar cases.</span></span></span></span></p> <p><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Investors did not accurately assess risks</span></span></strong></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Many of the investors who lost their money in the online funds had not understood the risks they were taking. There are several likely reasons why Chinese investors misread risks in the online finance sector: </span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>1. The Chinese growth miracle has lasted so long that many people have seen nothing but increasing economic prosperity for their entire lives. In that context, it is not difficult to see why many would believe claims of amazing investment opportunities.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>2. The government’s active role in the economy leads to the expectation that financial products that are publicly sold (and in this case, officially endorsed) would be regulated and safe. Victims of online finance fraud in China have </span></span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><a href="">expressed</a></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> dismay over the fact that the government allowed these risky businesses practices.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>3. Herd behavior is common in Chinese markets, partly because the rates offered by banks are so low that promising investment opportunities are in high demand. One example of such behavior was in 2015 when Chinese stock markets climbed quickly as citizens rushed to buy stocks (this time also endorsed by the government), and the market subsequently crashed. A more bizarre example is from 2009, when the misconception that garlic could protect against infection with the swine flu spread quickly, resulting in large price increases as people rushed to buy garlic.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>4. Online finance removes many middlemen, decreasing the distance between the buyer of financial products and the investments. This innovation means the typical investor takes a step towards the role of banker, requiring him to more actively assess risk.</span></span></span></span></p> <p><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Regulation will dry out funding for small businesses</span></span></strong></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>In short, many investors lack the experience to assess the risks of online financial products, resulting in many losing their money, which in turn caused them to protest. The sector will now be regulated. In a recent </span></span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><a href="">speech</a></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>, an official from the Banking and Regulatory Commission, Fan Wenzhong, said that fintech had entered a high-risk era. Moreover, at the recent Financial Development and Stability Committee meeting, online finance was identified as one of four focal areas for risk prevention in the financial system.</span></span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Once online finance becomes more strictly regulated, many of the financial flows will dry out, depriving small businesses of the funding that the functioning parts of the sector would have generated. The problem of underfinanced smaller enterprises will likely persist until the next time innovation opens a new unregulated market, which the government may or may not initially support. If individuals were granted more pluralistic information in their investment decisions outside the online sector perhaps that would train them to better assess risk – otherwise the events surrounding China’s online finance platforms are likely to repeat themselves.</span></span></span></span></p> <p><strong><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>This article was first published <a href="">by China Economic Review on October 18, 2018. </a></span></span></span></span></strong></p></div> </div> </div> Fri, 19 Oct 2018 13:44:50 +0000 komprakti 8361 at Chinese mercenaries are tightening security on the Belt and Road <span> Chinese mercenaries are tightening security on the Belt and Road</span> <span><span lang="" about="/en/user/666" typeof="schema:Person" property="schema:name" datatype="">alehna</span></span> <span>Wed, 10/17/2018 - 15:54</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-10-19T12:00:00Z">19/10/18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/helena-legarda" hreflang="en">Helena Legarda</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>Chinese private security companies (PSCs) are increasingly going global. Not so long ago they focussed mostly on providing bodyguard services for China’s rich and famous, and guarding facilities in China. But now, China’s growing global footprint has driven this sector to start operating beyond China’s borders. </strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-10/181019_CHinese_Private_Security_Company_pbu771129_08.jpg?itok=mRelDQJu 325w, /sites/default/files/styles/max_650x650/public/2018-10/181019_CHinese_Private_Security_Company_pbu771129_08.jpg?itok=c7toBKW2 650w, /sites/default/files/styles/max_1300x1300/public/2018-10/181019_CHinese_Private_Security_Company_pbu771129_08.jpg?itok=WLIJGd8V 1300w, /sites/default/files/styles/max_2600x2600/public/2018-10/181019_CHinese_Private_Security_Company_pbu771129_08.jpg?itok=K85Y-cjs 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-10/181019_CHinese_Private_Security_Company_pbu771129_08.jpg?itok=mRelDQJu" alt="A Chinese private security company" title="Image by ImagineChina" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p>China has had a private security sector since the mid-1990s when a small number of PSCs were set up to provide services domestically. These companies operated in legal limbo until the sector was legalised in 2009 with the passing of the <a href=";id=7779&amp;CGid">Regulation on the Administration of Security and Guarding Services</a>. Since then, the sector has boomed. It is estimated that in 2018 there were <a href="">over 5000</a> PSCs in China. The vast majority still operate exclusively in China, but some are now starting to provide their services abroad. In 2016 there were reportedly <a href="">about 20 Chinese PSCs</a> operating in the international market.</p> <p><strong>The BRI drives the internationalization of private security companies</strong></p> <p>The main driver behind this internationalisation is the Belt and Road Initiative (BRI). Involving <a href="">some 65 countries and an estimated US$900 billion</a> of planned investments around the globe, the BRI has substantially expanded China’s global economic presence, often in unstable countries where risks are high. Be it providing maintenance for power plants in Iraq, developing infrastructure in Pakistan or drilling for oil in South Sudan, they face a growing number of threats - from transnational terrorism to anti-Chinese sentiment.</p> <p>In many of these countries, Chinese companies feel inadequately protected by local security forces - a perception that is underlined every time a Chinese worker is kidnapped or attacked while working on a BRI-linked project. In Pakistan, home to the <a href="">China–Pakistan Economic Corridor</a> (CPEC), the flagship project of the BRI, attacks have already cost the lives of <a href="">at least 44 Chinese nationals</a> since 2014, including <a href="">two teachers</a> and an <a href="">employee of a shipping company</a>.</p> <p>Until a couple of years ago, Chinese companies operating overseas often hired well-known international security giants, such as G4S or Control Risks. Chinese PSCs were seen as too inexperienced, and their services as inadequate, given that most Chinese PSC employees are unarmed when abroad. But while these limitations remain, Chinese companies are increasingly turning to Chinese PSCs for protection overseas.</p> <p>The reasons for this shift include the language and cultural barriers faced when working with non-Chinese staff as well as financial considerations, since international alternatives tend to be substantially more expensive. Some contractors estimate that a team of <a href="">12 Chinese guards</a> might cost the same as a single US or British guard.</p> <p><strong>Beijing encourages Chinese companies abroad to hire homegrown private security companies</strong></p> <p>But the most important reason is that the Chinese government reportedly encourages Chinese companies operating abroad to hire homegrown PSCs for their security needs. Beijing knows that it must protect its citizens from the risks they face when going overseas to follow its policy priorities. But it is reluctant to deploy the People’s Liberation Army (PLA) for protection. That would mean an official abandonment of China’s long-standing <a href="">non-interference policy</a> and it could lead to serious international backlash. As a result, Chinese private security companies have turned into a good alternative.</p> <p>Despite their nominally private status, Chinese PSCs are mostly staffed by former PLA soldiers with close, if indirect, ties to Beijing. They therefore operate with the tacit support of the Chinese government. As a result, Beijing can keep an eye on what these companies are doing while still maintaining plausible deniability in case things go wrong.</p> <p>Examples of Chinese PSCs’ overseas activities are few, as this remains an opaque sector. But over the last few years a handful of instances have made headlines. In the summer of 2016, employees from Chinese PSC DeWe Security were caught in the middle of a <a href="">clash between warring local factions</a> in Juba, South Sudan while protecting workers from the China National Petroleum Corporation operating in the country. And two years earlier in June 2014, VSS Security was hired to <a href="">evacuate 1000 Chinese workers</a> from the China Machinery Engineering Corporation based in Iraq who were fleeing from a standoff between Iraqi government troops and the so-called Islamic State.</p> <p>Chinese PSCs are likely to continue their internationalisation through BRI-linked opportunities. This potentially offers a good solution to security concerns in BRI countries - Chinese PSCs could simultaneously secure Chinese interests and improve security conditions in dangerous regions without the direct intervention of Beijing.</p> <p>But there is a risk that increasingly active Chinese PSCs with little conflict experience - the closely associated PLA has not seen large-scale combat since the brief war with Vietnam in 1979 - may mishandle conflict scenarios. Such a situation would be a political disaster for Beijing, undermining China’s efforts to allay concerns over its international investments and its self-proclaimed intentions to become a responsible global power.</p> <p><strong>The article was first published by <a href="">East Asia Forum on October 16, 2018.</a></strong></p></div> </div> </div> Wed, 17 Oct 2018 13:54:35 +0000 alehna 8346 at Italy charts risky course with China-friendly policy <span>Italy charts risky course with China-friendly policy</span> <span><span lang="" about="/en/user/646" typeof="schema:Person" property="schema:name" datatype="">jheller</span></span> <span>Thu, 10/11/2018 - 10:47</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-10-11T12:00:00Z">11/10/18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/lucrezia-poggetti" hreflang="en">Lucrezia Poggetti</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>Italy’s right-wing populist government has embarked on a course of all-out cooperation with China, presenting it to the Italian public as an alternative, while alienating European partners. Ultimately, a more active China policy that lacks balanced assessments is setting Italy on a risky route.</strong><span><span><span><strong><span> </span></strong></span></span></span></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-10/181011_flaggen%20China%20Italien_123rf_97116174_m.jpg?itok=XwGjN17l 325w, /sites/default/files/styles/max_650x650/public/2018-10/181011_flaggen%20China%20Italien_123rf_97116174_m.jpg?itok=KcrNmdMw 650w, /sites/default/files/styles/max_1300x1300/public/2018-10/181011_flaggen%20China%20Italien_123rf_97116174_m.jpg?itok=qBsz23-A 1300w, /sites/default/files/styles/max_2600x2600/public/2018-10/181011_flaggen%20China%20Italien_123rf_97116174_m.jpg?itok=GiNk0ct4 2463w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-10/181011_flaggen%20China%20Italien_123rf_97116174_m.jpg?itok=XwGjN17l" alt="image" title="Italy is crafting a new China strategy and might sacrifice a common EU China policy for better access to Chinese investment. Source: bakai / 123rf." typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span>Since the formation of the coalition government of the anti-establishment Five Star Movement (5SM) and the right-wing League on June 1, 2018, Italy has started to craft an unprecedentedly active China policy. Traditionally, Italian foreign policy had mostly focused on relations with <span><span><a href="">Brussels, Washington and partners in the Mediterranean</a></span></span> region.</span></span></span></span></p> <p><span><span><span><span>Now, within less than five months, the government set up a “<span><span><a href="">China Task Force</a></span></span>” under the Ministry of Economic Development, and announced Italy’s plan to become the first G7 member to sign a <span><span><a href="">Memorandum of Understanding</a></span></span> on the Belt and Road Initiative (BRI). The government also stated its intent to position Italy as a leader in cooperating with China’s industrial upgrading agenda, “Made in China 2025,” signaling greater openness to the kind of Chinese investments that have raised fears of a sellout of sensitive technologies or critical infrastructure across Europe. </span></span></span></span></p> <p><span><span><span><span>The China Task Force encourages Italian economic actors, especially public ones, to seek greater cooperation with Beijing. Only recently, as part of Economic and Finance Minister Giovanni Tria’s visit to China, <span><span><a href="">four agreements were signed</a></span></span> with Chinese state companies and banks. Among the signatories were Italy’s leading natural gas infrastructure and shipbuilding companies, SNAM and Fincantieri, the Bank of Italy and Cassa Depositi e </span>Prestiti <span> – an Italian investment bank whose majority stake belongs to Tria’s ministry. The two governments agreed on cooperating in <span><span><a href="">third countries</a></span></span>. At the same time, <span><span><a href="">Italian ports</a></span></span> are promoting themselves as better gateways to Europe than Greece’s Piraeus in an effort to attract Chinese investors. </span></span></span></span></p> <p><span><span><span><span>There is no doubt that a more active China policy could bring economic opportunities to Italy, in the form of increased visibility for Italian companies in the Chinese market. Yet the Italian government so far lacks a balanced assessment of its cooperation with Beijing. It mainly relies on the newly appointed Undersecretary of State for Economic Development, <span><span><a href="">Michele Geraci</a></span></span>, who has lived and taught economics in China for ten years. Geraci set up and runs the China Task Force with 5SM leader and Deputy Prime Minister Luigi Di Maio – and he enthusiastically promotes measures and deals that welcome Chinese inroads in Italy, including in critical infrastructure. </span></span></span></span></p> <p><span><span><span><strong><span>Architect of China Task Force calls for all-out cooperation with Beijing </span></strong></span></span></span></p> <p><span><span><span><span>Geraci had started to promote himself as the possible architect of a more active Italian China policy <span><span><a href="">in the run-up to the March general election</a></span></span>. A few days before his appointment to his present job at the Ministry of Economic Development on June 13, 2018, he previewed his future course in a <span><span><a href="">controversial op-ed</a></span></span> on the blog run by 5SM founder Beppe Grillo. He called for a range of China-focused policies. These included proposals for exchange of information with China in the realm of public security, at a time when Beijing is increasing state control over people’s lives through surveillance technology and other means.     </span></span></span></span></p> <p><span><span><span><span>Geraci also outlined a plan to realize 5SM and League’s election campaign promises, namely the universal income and flat tax. For example, he thinks that Chinese investments would help Italy implement the proposed tax system. The op-ed prompted a group of <span><span><a href="">Italian scholars based abroad to publish a letter</a></span></span> criticizing what they viewed as a naïve belief in a “Chinese panacea.”</span></span></span></span></p> <p><span><span><span><span>The deals envisioned by Geraci may indeed create precarious dependencies on China, especially as the 5SM-League government is set to vote on a budget that breaks EU rules incorporated into the Italian constitution – a step that would leave Italy <span><span><a href="">without access to financial assistance</a></span></span> under the European Central Bank. In Greece, COSCO’s acquisition of the Port of Piraeus put Greek <span><span><a href="">jobs at risk</a></span></span> and contributed to a <span><span><a href="">worsening of labor conditions</a></span></span>. Italy’s growing dependency on China could also have far-reaching consequences for European China policy. Just as Greece has done in the past, Italy might sacrifice a common EU China policy for fear of losing access to Chinese investment.</span></span></span></span></p> <p><span><span><span><strong><span>Italy’s China policy shift alienates European partners</span></strong></span></span></span></p> <p><span><span><span><span>Italy’s new strategy for China marks a radical shift on investment, BRI and other issues. Of course, previous Italian governments also looked to China for economic opportunities. In 2017, Italy’s president Sergio Mattarella led a huge business delegation to Beijing. The prime minister at the time, Paolo Gentiloni, attended the May 2017 Belt and Road Summit in Beijing, hoping that Italy would become a protagonist along the BRI.</span></span></span></span></p> <p><span><span><span><span>This outreach was however not based on a general China-friendly policy. Just as France and Germany, the previous Italian government was cautious about allowing Chinese takeovers in strategic sectors. It co-signed a letter with Germany and France that started discussions over setting up an EU investment screening mechanism in Brussels. Earlier this year, Italy’s ambassador to China signed a report critical of BRI along with other European heads of missions.</span></span></span></span></p> <p><span><span><span><span>Until a few months ago, 5SM founder Grillo shared this skepticism. The 5SM came out strongly against China’s unfair trade practices in the past. The populist party has now reversed its previous positions.</span></span></span></span></p> <p><span><span><span><span>In a snub to Germany and France, Geraci said that Italy <span><span><a href="">does not want an investment screening mechanism at the EU level</a></span></span>. He has scoffed at Lufthansa’s plans to buy struggling Alitalia, saying that he would prefer selling part of the Italian flagship airline to <span><span><a href="">Chinese investors</a></span></span>. This, according to Geraci, would allow Italy to keep control of Alitalia in Italy’s “public hands with [Chinese] private capital.” Geraci is overlooking the fact that Communist Party (CCP) officials are often directly involved in management decisions of Chinese “private” investors. </span></span></span></span></p> <p><span><span><span><span>And while the UK and other western democracies have raised <span><span><a href="">national security concerns</a></span></span> about Huawei’s involvement in the country’s networks, 5SM leaders envisage <span><span><a href="">more cooperation</a></span></span> with the Chinese information technology company, <span><span><a href="">worrying Italian intelligence</a></span></span>.     </span></span></span></span></p> <p><span><span><span><span>The announced Italian endorsement of BRI also marks a major shift, as it entails an embrace of the initiative in principle rather than just seeking selective economic opportunities under the BRI label. Beyond trade, Italy now seems to be interested in setting up a comprehensive partnership with China in an effort to become its main economic and <span><span><a href=";cxg=web&amp;Sfrom=twitter">political partner in Europe</a></span></span>. </span></span></span></span></p> <p><span><span><span><strong><span>Italian populists are an easy target for China</span></strong></span></span></span></p> <p><span><span><span><span>The ambitious Geraci has filled a vacuum in Italy where a nuanced public discussion on China is largely missing. Not unlike in other European countries, debates on China mostly revolve around economic issues, with limited discussions about security risks.</span></span></span></span></p> <p><span><span><span><span>The rise of Eurosceptic populists has made Italy susceptible to advances from Beijing, which has developed a pattern of targeting European countries with economic vulnerabilities and anti-European sentiment to present itself as an alternative partner and investor.</span></span></span></span></p> <p><span><span><span><span>China’s outreach to Eurosceptic political parties has precedents across Europe. In Germany, the far-right Alternative für Deutschland (AfD) <span><span><a href="">has voiced sympathies</a></span></span> for China’s model of economic development. In Greece and Hungary, political elites openly claim that China is filling a vacuum left by the EU.  </span></span></span></span></p> <p><span><span><span><span>With its uncritical embrace of China, the 5SM-League coalition not only creates risks for Italy, but also threatens to undermine common European interests. After the UK’s exit from the EU next year, Italy will remain among Europe’s big 5 together with France, Germany, Poland and Spain. A unified European China policy, which French and German officials have been calling for, is currently drifting further out of reach. </span></span></span></span></p></div> </div> </div> Thu, 11 Oct 2018 08:47:13 +0000 jheller 8256 at China’s march towards cyber hegemony <span>China’s march towards cyber hegemony</span> <span><span lang="" about="/en/user/646" typeof="schema:Person" property="schema:name" datatype="">jheller</span></span> <span>Mon, 10/08/2018 - 10:33</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-10-08T12:00:00Z">08/10/18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/hauke-gierow" hreflang="en">Hauke Gierow</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong><span><span>Despite much effort, China still has many problems achieving its goal of cyber sovereignty. But on the way towards independence, the country might achieve something else: cyber hegemony.</span></span></strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-10/181005_microchip_flickr_Yuri%20Samoilov.jpg?itok=fXnHatNp 325w, /sites/default/files/styles/max_650x650/public/2018-10/181005_microchip_flickr_Yuri%20Samoilov.jpg?itok=ubdhVQuU 650w, /sites/default/files/styles/max_1300x1300/public/2018-10/181005_microchip_flickr_Yuri%20Samoilov.jpg?itok=GLOW3-b3 1300w, /sites/default/files/styles/max_2600x2600/public/2018-10/181005_microchip_flickr_Yuri%20Samoilov.jpg?itok=KIBRF7vG 2048w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-10/181005_microchip_flickr_Yuri%20Samoilov.jpg?itok=fXnHatNp" alt="image" title="While China still needs Western technology in the hardware sector, it can dictate the terms for Western software companies that want to enter the Chinese market. Source: Yuri Samoilov, flickr." typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p>For years, the Chinese government has propagated a strategy to boost "cyber sovereignty," i.e. to achieve independence from Western IT-products, standards and technologies. But even though the government invests a lot of money, brainpower and political leadership, the strategy still faces many obstacles and is not producing the intended results. However, because of its massive market and its ability to gather data on a billion of users, China may achieve something else in the process – which I will call cyber hegemony in this article.</p> <p>The IT landscape can broadly be divided into hardware and software. China needs help in some parts of the hardware sector – and wants Western technology even at a high cost. On the other hand, China has developed a closed system of software and services independent of Google, Facebook and Amazon, which dominate the markets in almost all other countries. This split has consequences for China's future IT policy, but also for business strategies of global IT companies.</p> <p><strong>Hardware: So much public money, so few working processors</strong></p> <p>The lack of homegrown Chinese technology became apparent this year, when Chinese mobile phone and technology company ZTE almost collapsed after being hit by US sanctions. Because it could no longer be in business with US firms around the world, the company lost many customers and critical parts of its supply chain. With the embargo kicking in, ZTE was no longer able to make smartphones, because it lacked tiny processors – so-called systems on a chip (SOC) - made predominantly by the US company Qualcomm. </p> <p>CPUs and SOCs have been a critical part of China's high tech-strategy for years. But apart from prestigious supercomputers, Chinese chips lack the capacity and calculating power of those of international competitors. Most laptops and desktop computers sold around the world use chips either made by Intel or AMD or are based on designs licensed from ARM. This is also true for China. Chinese manufacturers only achieve meaningful market penetration in chips for routers, home electronic devices or so-called Internet of Things appliances. </p> <p>To catch up with western chipmakers, a state-owned enterprise from China tried to take over US chipmaker Micron in 2015, offering 23 billion USD. The offer was rejected. Later, Micron reported a massive case of industrial espionage and accused newly founded Fujian Jinhua Integrated Circuits of attempts to copy its products. Fujian Jinhua asked Taiwanese chipmaker UMC for help – and Micron now accuses both of them of using material copied by former Micron employees, who now work for UMC, to circumvent the long and arduous process of designing chips. </p> <p><strong>Software: China gives the could shoulder to western companies</strong></p> <p>Hardware is only part of the digital revolution – services and platforms are another. In China, this market is largely divided between Chinese players like Baidu, Tencent and Alibaba. Western IT giants such as Google and Facebook would also like to expand to China. The problem is that unlike the production of processors, their line of business is highly political in nature. A CPU will not ask about human rights, a user on an uncensored version of Facebook might.</p> <p>In 2010, international human rights activists praised Google for leaving the Chinese market instead of complying with the censorship regime. But now, it seems, Google wants to find a way back in. The Intercept reported about a supposedly secret plan within the organization to offer a Google platform with censorship built in across all its services  in China – from search to news, from pictures to maps. Google reportedly even made a prototype app for phones that would link (censored) search requests to individual phone numbers or SIM cards. The so-called "Dragonfly" project has vocal advocates. Google CEO Sundar Pichai is said to have met "high-ranking" Chinese officials, although no decision has been publicly announced. The problem for Google is that making Google’s services available is not a big priority for the Chinese government. So Google returns to China, it will be completely on Beijing’s terms.</p> <p>The same is true for Facebook. The social network that aims to connect the world would love to do the same in China. But there is no imminent market need and no business case for China or the Communist Party. In July, Facebook was awarded a Chinese subsidiary in Zhejiang, only to have it removed about a day later. The company had been set up to act as a startup-accelerator investing in Chinese companies.</p> <p>Even Microsoft changed its business policy for China in a dramatic and yet unseen way. While the company rejects to grant Western governments special conditions to make changes to its operating system, the same is not true for China. Windows 10 sends some telemetry data back to Microsoft – mostly diagnostic information used to further develop the software. Western users – private, business and government – can only limit the extent of those data transfers. Even though Microsoft was widely criticized for this behavior by many data privacy activists, it said that it did not plan to make any changes to the policy.</p> <p>Except, of course, for the Chinese government. After the government announced to ban some organizations from using Microsoft products, the company offered some substantial changes. Chinese government customers are now able to completely turn off the transmission of telemetry data. The government also mandated Microsoft to enable the use of homegrown Chinese encryption standards instead of the pre-installed ones. Microsoft announced the new partnership in a blogpost that sounded nothing like the statements usually distributed in other countries.</p> <p>The examples show that China is one of the most attractive target markets for many IT companies. For some it is the chance to gather more data and learn about the consumer habits of a whole new group of customers, which is quickly catching up to Europe and the United States in terms of purchasing power. For others, it is the possibility to sell to a vast market of government authorities and regulators.</p> <p><strong>All IT business with China can be political</strong></p> <p>The pull of the Chinese market presents a dilemma for western IT companies doing business in China – even in seemingly innocuous and unpolitical areas like business software. SAP and Salesforce might be asked, for example, to allow a connection between their software to manage employees and the different mechanisms that form China’s Social Credit System for rating citizen’s economic and social behavior. Companies that sell tools based on machine learning technology, voice sampling or facial recognition face other ethical questions: In China’s emerging system of digital autocracy these technologies might enable broad surveillance or repression of citizens. <br />  </p></div> </div> </div> Mon, 08 Oct 2018 08:33:25 +0000 jheller 8216 at Chinese associations in Germany focus on bringing talent back to China <span>Chinese associations in Germany focus on bringing talent back to China</span> <span><span lang="" about="/en/user/646" typeof="schema:Person" property="schema:name" datatype="">jheller</span></span> <span>Tue, 10/02/2018 - 09:32</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-10-02T12:00:00Z">02/10/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p>Felix Turbanisch<br /><strong>China uses civil associations to lobby for CCP causes among overseas Chinese in New Zealand, Australia and the United States. The same organizations are active in Germany, but the spectrum of Chinese associations is much broader. Their focus on technology reflects China’s ambitions for industrial upgrading.</strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-10/181002_Chinese_return_students_fair_pbu437244_27.jpg?itok=ka3TlqdF 325w, /sites/default/files/styles/max_650x650/public/2018-10/181002_Chinese_return_students_fair_pbu437244_27.jpg?itok=UMQYEPGA 650w, /sites/default/files/styles/max_1300x1300/public/2018-10/181002_Chinese_return_students_fair_pbu437244_27.jpg?itok=1w8jhKmX 1300w, /sites/default/files/styles/max_2600x2600/public/2018-10/181002_Chinese_return_students_fair_pbu437244_27.jpg?itok=_aY-qtnt 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-10/181002_Chinese_return_students_fair_pbu437244_27.jpg?itok=ka3TlqdF" alt="Chinese overseas students at a job fair for returnees in Nanjing, Jiangsu. The government uses monetary and other incentives to woe them to return to China. Source: ImagineChina." title="Chinese overseas students at a job fair for returnees in Nanjing, Jiangsu. The government uses monetary and other incentives to woe them to return to China. Source: ImagineChina." typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span><span><span>When the Association for Promotion of Chinese Culture in Germany <a href="">was founded in 2015</a></span></span><span><span>, a Chinese embassy representative urged it to “contribute to expanding Chinese soft power,” appealing to overseas Chinese’s “sincere love for the motherland.” Taking on this challenge, Liu Daiquan, a founding member, likened the overseas Chinese in Germany to a “hidden dragon and crouching tiger,” referring to their untapped potential. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>The launch of the association was applauded by the State Council’s Overseas Chinese Affairs Office, which operates under the leadership of the United Front Work Department (UFWD) <span><a href="">since the government reshuffle in March 2018</a></span>. The UFWD, in turn, reports directly to the CCP Central Committee. Its role has been expanded markedly under Xi Jinping who has <span><a href="">dubbed it a “magical weapon</a>,”</span> a term coined by Mao Zedong.</span></span></span></span></span></span></p> <p><span><span><span><strong><span><span>Many Chinese associations abroad pursue CCP goals</span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>Filtering the <span><a href=""><span><span>German register of associations</span></span></a></span> for China-related organizations yields roughly 900 entries. Mirroring New Zealand and Australia, they often fall into UFWD-sponsored categories. These organizations focus on instilling patriotic pride and loyalty to the CCP among overseas Chinese populations. In New Zealand and Australia, some of them have been accused of attempting to influence public opinion<span><a href=""><span><span> in their host countries.</span></span></a></span></span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Under the “guidance” of the Chinese embassy or consulates, several umbrella organizations (such as the </span></span><span><span><span><a href=""><span><span>All-German Association of Chinese Associations </span></span><span><span><span>全德华人社团联合会</span></span></span></a> </span></span></span><span><span>or the </span></span><span><span><span><a href=""><span><span>Overseas Chinese Service Centre </span></span><span><span><span>德国华人华侨互助中心</span></span></span></a></span></span></span><span><span>) maintain affiliations with Chinese women’s associations, regional trade organizations, various chapters of the Chinese Student and Scholars Association, alumni associations, as well as associations formed along professional or regional lines. </span></span></span></span></span></span></p> <a href="/sites/default/files/inline-images/181002_Chinese%20associations%20in%20Germany.png"><img alt="graph 1" data-entity-type="file" data-entity-uuid="f2e297d0-a36f-4375-9215-f062155843db" src="/sites/default/files/inline-images/181002_Chinese%20associations%20in%20Germany.png" width="700" class="align-center" /></a> <p><span><span><span><span><span><span>Parroting CCP propaganda, the goals of these associations include mainland China’s unification with Taiwan, as well as the pursuit of Xi Jinping’s <span><a href=""><span><span>“China dream” and “great rejuvenation,”</span></span></a></span> code for the country’s quest to restore its prominence on the world stage. They aim to foster “patriotism” and “identification with the motherland” while instilling “pride in being Chinese” and “improving the image of Chinese in Germany.” Association representatives are frequently invited to Overseas Chinese Affairs Offices in China or host delegations from China. Sometimes they publicly take a stance: in summer 2016, 56 Chinese associations <span><a href=";id=101"><span><span>jointly criticized</span></span></a></span> the South China Sea arbitration, emphasizing that they “stand with the motherland […].” </span></span></span></span></span></span></p> <p><span><span><span><span><strong><span><span>Emphasis on technology transfer and talent acquisition</span></span></strong></span></span></span></span></p> <p><span><span><span><span><span><span>Whereas the majority of all associations in Germany <span><a href=""><span><span>promote sports, education and culture</span></span></a></span>, professional associations make up the biggest share of Chinese associations in Germany – and one third of them operate in the technology sector. This focus reflects their members’ own career interests in Germany. But Germany’s industrial strength is also seen as a useful tool for advancing “Made in China 2025,” China’s ambitious program for industrial upgrading. Some of these associations explicitly focus on “Industry 4.0,” the German project to digitize industrial production. Others focus on emerging technologies such as chip making and artificial intelligence. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Apart from gathering technical expertise, these associations pave the way for Chinese talents to return to China. For example, the Association of Chinese Computer Scientists in Germany <span><a href=";view=article&amp;id=114&amp;catid=2&amp;Itemid=101"><span><span>presents itself</span></span></a></span> as an influential platform that can be used to recruit talents and import technology “according to governmental or commercial demand.” The Association for Chinese Personnel Exchange in Germany <span><a href="协会介绍"><span><span>provides a platform</span></span></a></span> to “use the newly-gained expertise to serve the motherland as soon as possible.”</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Some associations hint to technology transfer in their names, such as the Chinese R&amp;D Innovation Union Germany. At the founding ceremony of this consortium of Chinese enterprises, ambassador <span><a href=""><span><span>Shi Mingde said</span></span></a></span> that China was “in a critical stage of development from large to strong,” requiring “independent innovation capabilities.” According to Shi, the association would “serve the domestic market and add new impetus to domestic innovation.”</span></span></span></span></span></span></p> <p><span><span><span><span><strong><span><span>CCP opposition is often religious</span></span></strong></span></span></span></span></p> <p><span><span><span><span><span><span>But not all Chinese organizations active in Germany promote the CCP’s agenda.  Opposition groups can also be found in the register. Associations calling for a “democratic China” are <span><a href=""><span><span>almost all linked to Falun Gong</span></span></a></span>, a Buddhist-inspired meditation practice that the Chinese government calls an “evil cult.” Most provocatively, the Tuidang [“quit the party”] Service Center Germany is part of a worldwide movement encouraging CCP members to publicly renounce their membership. The only political association not linked to Falun Gong, yet critical of CCP policies, is Human Rights for China. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Most Chinese religious associations in Germany are Christian. 15 of at least <span><a href=""><span><span>76 congregations</span></span></a></span> are listed in the register; in Munich an entire Chinese school is devoted to Christianity. Religious associations provide a sense of community without political imperatives; it is here that their founders – often from Taiwan or Hong Kong – can meet their peers from the mainland on neutral grounds.  </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Naturally, the German register of associations does not reflect the entire spectrum of overseas Chinese activities. Most young Chinese would rather organize informally online; only associations in need of official recognition will choose to adopt a representative name and register themselves. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>The UFWD has always worked on deepening ties with overseas Chinese organizations and encouraged them to express loyalty to the motherland. Yet there seems to be fresh impetus to form associations abroad: Some 43 percent of <em>tongxianghui </em>(</span></span><span><span>同乡会</span></span><span><span>) groups that connect Chinese emigrants from the same region (one of the oldest types of overseas Chinese associations) registered after Xi Jinping became Secretary General of the CCP in November 2012.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Xi has also addressed the shifting composition of overseas Chinese communities, which are increasingly dominated by students and professionals. In his <span><a href=""><span><span>2015 speech on United Front work</span></span></a></span>, Xi described Chinese students abroad as an “important part of the talent pool.“ According to Xi, they should be encouraged to “return to work or serve the country in various forms.“</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Monetary and other incentives for returnees have overall been successful in the recent past. External factors such as unfavorable immigration policies in the United States can accelerate this trend. In 2017, <span><a href=""><span><span>eight</span></span></a><a href=""><span><span> Chinese students returned</span></span></a><a href=""><span><span> home for every ten s</span></span></a><a href=""><span><span>till studying </span></span></a><a href=""><span><span>abroad</span></span></a></span> – a record number, according to the Chinese Ministry of Education. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>The growing numbers of returnees to China should worry Germany, which faces a shortage of skilled workers. It is time that German policymakers start thinking of overseas Chinese as a strategic group and offering them incentives to stay in Germany – knowing that they are in competition with Chinese organizations whose goal it is to encourage these professionals to return to China. </span></span></span></span></span></span></p> <p><strong><span><span><span><span><span><span>Felix Turbanisch was an intern at the Mercator Institute for China Studies from April to September 2018. He is doing a master's degree in Chinese Studies and Economics at the University of Heidelberg.</span></span></span></span></span></span></strong></p></div> </div> </div> Tue, 02 Oct 2018 07:32:14 +0000 jheller 8201 at The BRI in Pakistan: Too big to fail <span>The BRI in Pakistan: Too big to fail</span> <span><span lang="" about="/en/user/286" typeof="schema:Person" property="schema:name" datatype="">h.seidl</span></span> <span>Thu, 09/20/2018 - 10:00</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2018-09-20T12:00:00Z">20/09/18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/jacob-mardell" hreflang="en">Jacob Mardell</a>, <a href="/en/team/thomas-s-eder" hreflang="en">Thomas S. Eder</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><span><span><span><span><strong>Even under a more critical government in Islamabad, the China-Pakistan Economic Corridor is unlikely to be derailed. The stakes for both sides are too high. Pakistan needs Chinese funding for its economic revival, and a healthy Pakistani economy is in China’s regional security interest.</strong></span></span></span></span></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2018-09/180920_China_Pakistan_Friendship_pbu805658_12.jpg?itok=eTEXwuWu 325w, /sites/default/files/styles/max_650x650/public/2018-09/180920_China_Pakistan_Friendship_pbu805658_12.jpg?itok=2GedWTaD 650w, /sites/default/files/styles/max_1300x1300/public/2018-09/180920_China_Pakistan_Friendship_pbu805658_12.jpg?itok=_RLxqDZt 1300w, /sites/default/files/styles/max_2600x2600/public/2018-09/180920_China_Pakistan_Friendship_pbu805658_12.jpg?itok=6XRf8F7Y 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-09/180920_China_Pakistan_Friendship_pbu805658_12.jpg?itok=eTEXwuWu" alt="Wall painting" title="After 46 years of strategic partnership between China and Pakistan, there is little reason to doubt either side’s commitment to the China-Pakistan Economic Corridor. Image by ImagineChina" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span>The Belt and Road project involving the largest amount of Chinese funding to date, the China-Pakistan Economic Corridor (CPEC), is coming under close <span><span><a href="">scrutiny</a></span></span> following the <span><span><a href="">inauguration of Imran Khan’s government</a></span></span> in August 2018. Khan’s party, Tehreek-e-Insaf (PTI), has <span><span><a href="">raised questions</a></span></span> about suspected CPEC-related irregularities, as well as overly generous conditions for Chinese companies. Beijing has now allowed Islamabad to invite investors from third countries to participate in CPEC, and to <a href="">expand project categories</a> in line with Khan’s social policy agenda. Projects in healthcare, education and vocational training can now be part of CPEC.</span></span></span></span></p> <p><span><span><span><span>Khan’s election comes at a time when Pakistan is facing another <span><span><a href="">balance-of-payments crisis</a></span></span>. If he has to turn to the IMF for a bailout, this would threaten to <span><span><a href="">derail China’s plans</a>, as the IMF would likely require Islamabad to limit further sovereign guarantees connected to large infrastructure projects</span></span>.</span></span></span></span></p> <p><span><span><span><span> Three years after the official launch of CPEC in 2015, data from the MERICS Belt and Road Tracker suggests, however, that Beijing and Islamabad are both too deeply invested in the infrastructure building efforts to let implementation grind to a halt. What is more, the implementation of CPEC had not been disrupted by a previous <span><span><a href="">IMF package</a></span></span> that ran until 2016. </span></span></span></span></p> <p><span><span><span><span><strong>Energy first – transportation and industry later</strong></span></span></span></span></p> <p><span><span><span><span>Rhetoric surrounding CPEC emphasizes overland connectivity, but it is inaccurate to think of the current incarnation of CPEC as a transport corridor running from China’s Xinjiang province to the Pakistani coast. The drive from Kashgar to Gwadar won’t be an easy one for some time yet, and the data suggests a different financial focus on energy, specifically on coal. </span></span></span></span></p> <p><span><span><span><span>Power plants constitute the bulk of already completed CPEC projects. Large coal-fired plants at Sahiwal and Port Qasim, which carry price tags of 1.6 billion USD and 1.98 billion USD, are the most significant. If one includes projects implemented and/or financed by Beijing that have (for many reasons) not been branded as part of CPEC, energy makes up an even larger share, with power plants accounting for over 90 percent of the cumulative total cost of 13.1 billion USD.</span></span></span></span></p> <p><span><span><span><span>The Port Qasim and Sahiwal power plants are both regarded as “early harvest” projects by CPEC’s planners - they are scheduled for completion before 2020, during “Phase I” of CPEC’s projected lifespan. According to CPEC’s official “<span><span><a href="">Long Term Plan</a>,</span></span>” the goal of the first phase is to address the “major bottlenecks to Pakistan’s economic and social development,” while the next two phases up to 2030 are supposed to trigger an “endogenous mechanism for sustainable economic growth.” In other words, Phase I will address Pakistan’s <span><span><a href="">crippling electricity shortages</a></span></span>, building a base for later industrial growth and connectivity with China. The latter stage of industrial development is reflected in ambitious, but to date mostly vague plans for joint industrial parks and special economic zones across Pakistan.</span></span></span></span></p> <p><span><span><span><span>Non-energy related projects considered in the “Phase I” category are mostly infrastructure projects that have been long in the making. These are considered low hanging fruit, and finishing them could constitute something of an economic stimulus. The schedule for Chinese investment and construction activities in Pakistan indicates a long-term strategy for Pakistan’s integration into China-centered value chains. Pakistan’s stabilization and gradual development is key to this strategy: first come energy supply and economic survival, followed by industrialization, self-sustained growth and enhanced connectivity with Xinjiang.</span></span></span></span></p> <p><span><span><span><span>Islamabad’s interest in the success of such plans is obvious: it wants to break through economic stagnation and navigate the current balance-of-payment crisis while avoiding the budgetary strictures coming with another IMF package. Potential longer-term problems, budgetary and beyond, will be another government’s headache. </span></span></span></span></p> <p><span><span><span><span><strong>Economic development could be a counterweight to terrorism</strong></span></span></span></span></p> <p><span><span><span><span>The economic health of its “<span><span><a href="">all-weather partner</a></span></span>” is also a serious strategic concern for Beijing. In its fight against the so-called “<span><span><a href="">three evils</a></span></span>” of “terrorism, separatism, and religious extremism,” Beijing knows that it needs a secure and stable neighbor at the border of its troubled western autonomous region of <span><span><a href="">Xinjiang</a></span></span>. For Beijing, Pakistan is also <span>a useful thorn in the side of India</span>, China’s strategic rival in the region. More than this, Pakistan remains China’s only ally.</span></span></span></span></p> <p><span><span><span><span>After 46 years of strategic partnership, there is little reason to doubt either side’s commitment to CPEC, and with projects like <span><span><a href="">Sahiwal already completed ahead of schedule</a></span></span>, implementation indeed proceeds apace. However, as elsewhere along the Belt and Road, Beijing’s short-term economic gain is also firmly on the agenda, and Chinese state-owned enterprises like Huaneng Shandong Power are reaping huge benefits from projects in Pakistan, Sahiwal included.</span></span></span></span></p> <p><span><span><span><span>CPEC has not proceeded without setbacks. Several prominent energy projects have been dropped or delayed, with the 2017 cancellation of <span><span><a href="">five prominent energy projects</a> (mostly coal plants) </span></span>being the most damaging blow so far. The reasons behind the projects’ cancellation are not entirely clear, but the upshot is that they were deemed “unfeasible” due to logistical obstacles and/or an inability to agree on commercial terms. But we have observed no overall reduction in the rate at which projects have been agreed, constructed, and completed over the past three years.</span></span></span></span></p> <p><span><span><span><span>Security and geopolitical concerns, such as the insurgency in Balochistan, Islamist terror attacks, and India’s objection to CPEC for running through disputed territory in Kashmir, are the most frequently cited obstacles. While serious, none of these problems are new or necessarily growing.</span></span></span></span></p> <p><span><span><span><span><strong>Chinese business interests undermine BRI goals</strong></span></span></span></span></p> <p><span><span><span><span>Pakistan’s financial situation <em>is </em>however worsening. Although the details of loan agreements between China and Pakistan are kept secret, Beijing’s loans are for the most part concessional. The repayment of Chinese state-owned enterprises (SOEs) is a bigger concern. About <span><span><a href="">two thirds</a></span></span> of Belt and Road financing in Pakistan comes from Chinese companies in the form of direct investment (albeit investment directly facilitated by loans from Chinese policy banks).</span></span></span></span></p> <p><span><span><span><span>The terms extracted by these big Chinese SOEs are anything but concessional development finance. Both Qasim and Sahiwal power projects were built and are operated by consortia involving Chinese SOEs, and both charge <span><span><a href="">high tariffs</a></span></span> for electricity. While no one can blame these companies for securing the best deals possible, expensive electricity undermines the overall goal of CPEC’s “Phase I”: to establish a solid base for future industrial growth. With <span><span><a href="">electricity prices</a></span></span> twice as high as the ones in Bangladesh, Pakistani textile factories will not be competitive. This part of the BRI, aggressively helping Chinese companies expand and build profit bases abroad, regularly undermines Beijing’s other strategic goals.</span></span></span></span></p> <p><span><span><span><span>Even if Khan’s party takes a tougher stance than the previous government on CPEC projects, it might not spell the end of BRI progress in Pakistan. Should Khan’s push for transparency materialize, perhaps pushed by the IMF, it might help Pakistan to negotiate more transparent terms with its giant neighbor. Pakistan may be the needier party, but Beijing also cannot afford to abandon an initiative that was pitched as securing the economic health of its ally.</span></span></span></span></p> <p><span><span><span><span>CPEC is a “flagship project” of the entire Belt and Road Initiative, and more than 15 billion USD of Chinese FDI and loans are already tied up in relevant projects (not counting those in the planning phase). Greater transparency could help to fulfill the most necessary condition for CPEC’s success: Pakistan’s economic revival. Pakistan’s successful transformation into an industrial base would ultimately be in China’s own interest, because it would reflect positively on the overall BRI.</span></span></span></span></p> <p><em><a href="">Click here,</a> to access our map on the BRI in Pakistan or learn more about the MERICS BRI tracker and database <a href="">here.</a></em></p></div> </div> </div> Thu, 20 Sep 2018 08:00:29 +0000 h.seidl 8156 at