Blog en China seems to tone down its 16+1 engagement: three possible explanations <span>China seems to tone down its 16+1 engagement: three possible explanations</span> <span><span lang="" about="/en/user/286" typeof="schema:Person" property="schema:name" datatype="">h.seidl</span></span> <span>Wed, 03/14/2018 - 17:05</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="2018-03-14T12:00:00Z">14/03/18</time> </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-GB" xml:lang="EN-GB" xml:lang="EN-GB">News that China plans to reduce the frequency of its summits with Central and Eastern European countries has been interpreted as a charm offensive towards Brussels, where many see the 16+1 as divisive. But it could also be an acknowledgment that many of China’s economic promises to the region have not materialized or even an attempt to further divide Europe. </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/2018-03/China-CEEC%20Meeting%202016.jpg?itok=S3Y0SlvB 325w, /sites/default/files/styles/max_650x650/public/2018-03/China-CEEC%20Meeting%202016.jpg?itok=Z9QK7jG6 650w, /sites/default/files/styles/max_1300x1300/public/2018-03/China-CEEC%20Meeting%202016.jpg?itok=r-H4m3Q2 1300w, /sites/default/files/styles/max_2600x2600/public/2018-03/China-CEEC%20Meeting%202016.jpg?itok=50Gen9W5 2048w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-03/China-CEEC%20Meeting%202016.jpg?itok=S3Y0SlvB" alt="China-CEEC Meeting 2016" title="China-CEEC Meeting 2016. Image by Latvian Foreign Ministry via flickr (CC BY-NC-ND 2.0)." 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-GB" xml:lang="EN-GB" xml:lang="EN-GB">“China may pare back 'divisive' eastern Europe summits,” </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Reuters reported on Monday</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">, referring to Beijing’s annual summits with 16 Central and Eastern European countries (CEEC), which include both EU member states and neighbourhood countries. The format has received close scrutiny from Brussels ever since its creation in 2012. China now seems to be delaying the next meeting scheduled for 2018 in the Bulgarian capital of Sofia amidst concerns that the high-level symbolic cooperation under the format might undermine its relations with the EU.  </span></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">The Reuters article quoted a senior EU official as saying that the 16+1 framework will keep existing, “but it will be a less intensive format, probably shifting more to bilateral talks.” European diplomats also said that China might shift the current annual basis of the summits gathering 16+1 heads of government into a biannual format. Three – potentially overlapping – lines of reasoning might explain why China has decided to tone down its 16+1 engagement.</span></span></span></span></p> <p><span><span><span><strong><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Explanation 1: China prioritizes good relations with the entire EU</span></strong></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">EU officials quoted in the Reuters article seem to interpret this development as a response to criticism of the format coming from other parts of Europe. Lately, concerns about the 16+1 format </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">saw a revival in </span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span>Brussels</span></span></span></span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> and some </span><span>Western European states</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">, increasingly creating an image problem for China. Beijing might have decided that it was high time to address this issue – not least in light of the EU moving forward with its proposal for a new pan-European investment screening mechanism, which is primarily directed at Chinese state-led acquisitions in Europe. </span></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">The overall success of China’s global trade and infrastructure plan and Xi Jinping’s flagship foreign policy project, the Belt and Road Initiative (BRI), very much depends on </span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">favorable</span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> perceptions and support of countries involved. As such, Beijing needs to take care of its reputational capital, and the move to tone down its 16+1 engagement might be a step in this direction. </span></span></span></span></p> <p><span><span><span><strong><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Explanation 2: China does some housekeeping  </span></strong></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Another plausible explanation is that China might want to address an emerging expectations-capability gap that has become visible in the 16+1 context. Annual summits have created high expectations in the region, but many of Beijing’s promises for investment and infrastructure financing in CEEC </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">have failed to materialize</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">. </span></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Flagship BRI projects in the CEEC, such as the Belgrade-Budapest railway, were put on hold in light of non-compliance with EU legislation.</span> <span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Comprising of only one bridge in Serbia and one motorway in Macedonia the list of China-financed 16+1 infrastructure construction projects completed as of late 2017 is rather short. </span><a href=""><span>China’s own official data suggest</span></a><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">s</span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> that as of June 2017 roughly EUR 6.7bn of FDI had flown into CEE industries, including into machinery equipment manufacturing, chemicals, telecoms and new energies. Taking into account the size and output of CEE economies, the investment is significant, </span><a href=""><span>but it pales</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> when compared to Chinese investments in Western EU member states. Between 2000 and 2016, Germany alone saw an </span><a href=""><span>inflow of EUR 18.8bn of Chinese FDI</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">. To date, the 16+1 China-CEE investment cooperation fund </span><a href=""><span>has failed to complete a single sizeable transaction</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">.</span></span></span></span></p> <p><span><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Explanation 3: China seeks to deepen divisions within Europe</span></strong></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Ultimately, there could also be a more “sinister” explanation as to why Beijing considers toning down its engagement within the 16+1 framework. Several CEE EU member states will be quick to blame the </span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">shift on</span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> larger member states, like France and Germany, for having spoiled their special ties with China within the 16+1 framework. </span><a href=""><span>Reportedly</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">, sources close to the Polish government expressed dismay over “old Europe’s” attempt to weaken the 16+1 format. Part of the CCP’s strategic calculus in downgrading the 16+1 format might be to further kindle existing political cleavages between the cash-strapped CEEC economies and the rest of the Union and to further weaken Europe’s ability to find a consensus on how to best engage a politically and economically more assertive China. </span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">While, in the past, the Xi Jinping administration </span><a href=""><span>has left no doubt</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> that it is interested in the persistence of a consolidated European single market, it might eventually be willing to sacrifice this goal in return for </span><a href=""><span>support from individual EU member states and neighborhood countries for its own political model and foreign policy goals</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">. </span></span></span></span></p> <p><span><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The EU should seize the moment</span></strong></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Rather than second-guessing Beijing’s motives for changing its 16+1 policy, decision-makers in Brussels and in EU member states, like France and Germany, should seize the moment and seek greater alignment of EU member states’ China policies. Expediting the implementation of existing plans in Brussels for a new EU connectivity initiative for Europe seems a timely venture, as more CEEC come to terms with the sobering realties of China’s economic engagement in the region. Brussels also needs to popularize the message among opinion multipliers in CEE EU member states and EU neighborhood countries that so far China has not lived up to its ambitious financing and investment rhetoric and that Chinese activities are a long way away from matching what the EU has put on the table to date. </span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">At the same time, </span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Germany and France</span> <a href=""><span>must continue to build a stronger pan-European perspective into their bilateral policies towards China</span>.</a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> Both</span> <span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">German Chancellor Angela Merkel and French President Emmanuel Macron recently pointed out the importance for European companies to get better access to the Chinese market. They also warned about the risks of state-driven Chinese takeovers of European high-tech companies.</span></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">CEEC governments, however, do not consider these issues priorities. They hope that Chinese investment will give their economies a push, and that closer relations with Beijing will increase their leverage vis-à-vis Brussels. It is up to Germany and France to initiate a focused debate among the greatest possible number of EU member states over the corner stones of a European China policy that takes everybody’s interests into account. Recent expressions of concern by Angela Merkel about China’s growing political influence in Europe will hopefully translate into a China policy that is more inclusive of Europe-wide interests.</span></span></span></span></p></div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <div class="field--item"> <article role="article" about="/en/team/lucrezia-poggetti" class="team is-promoted tile-view clearfix darktile"> <a href="/en/team/lucrezia-poggetti" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-08/Lucrezia%20Poggetti.jpg) no-repeat;background-size: cover;"> <h3> <span>Lucrezia Poggetti</span> </h3> <div class="content"> <div class="field field--field-position">Research Associate</div> </div> </div> </a> </article> </div> <div class="field--item"> <article role="article" about="/en/team/jan-weidenfeld" class="team is-promoted tile-view clearfix darktile"> <a href="/en/team/jan-weidenfeld" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/Jan_Gaspers.jpg) no-repeat;background-size: cover;"> <h3> <span>Jan Weidenfeld</span> </h3> <div class="content"> <div class="field field--field-position">Head of the European China Policy Unit</div> </div> </div> </a> </article> </div> </div> </div> </div> Wed, 14 Mar 2018 16:05:20 +0000 h.seidl 6566 at "The PLA is set to become more active on the global stage" <span>&quot;The PLA is set to become more active on the global stage&quot;</span> <span><span lang="" about="/en/user/646" typeof="schema:Person" property="schema:name" datatype="">jheller</span></span> <span>Mon, 03/12/2018 - 12:57</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="2018-03-12T12:00:00Z">12/03/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p>Interview with <a href="/en/team/helena-legarda">Helena Legarda</a></p> <p><strong>China wants to develop a “world class” military force that can “fight and win wars” by 2049. So it comes as little surprise that the defense budget just got another boost. Military spending will rise by 8.1 percent this year. What’s behind this figure and China’s military modernization drive? Helena Legarda discusses the 2018 military budget and China’s strategies.</strong></p></div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p>Questions: <a href="/en/team/ruth-kirchner">Ruth Kirchner</a></p></div> <div class="field field--name-field-podca field--type-file field--label-hidden field--items"> <div class="field--item"><span class="file file--mime-audio-mpeg file--audio icon-before"><span class="file-icon"><span class="icon glyphicon glyphicon-headphones text-primary" aria-hidden="true"></span></span><span class="file-link"><a href="" type="audio/mpeg; length=17375616" title="Open audio file in new window" target="_blank">Merics Experts 51 Helena Legarda.MP3</a></span><span class="file-size">16.57 MB</span></span></div> </div> </div> </div> Mon, 12 Mar 2018 11:57:33 +0000 jheller 6356 at In Xi’s China, the party morphs into the state <span>In Xi’s China, the party morphs into the state</span> <span><span lang="" about="/en/user/301" typeof="schema:Person" property="schema:name" datatype="">smuscat</span></span> <span>Wed, 03/07/2018 - 10:26</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="2018-03-07T12:00:00Z">07/03/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">The CCP has always ruled supreme in China, but reform era leaders have pushed for a separation between party and state organs. </span></strong><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">This is changing under Xi Jinping. </span></strong><strong><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">The planned constitutional amendments at this year’s National People’s Congress and a recent Central Committee decision suggest a reversal of this process – and a takeover of state functions and offices by the CCP.</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/2018-03/180207_NPC_2018_pbu763862_07.jpg?itok=pLOJ8xhF 325w, /sites/default/files/styles/max_650x650/public/2018-03/180207_NPC_2018_pbu763862_07.jpg?itok=qJmc-jWF 650w, /sites/default/files/styles/max_1300x1300/public/2018-03/180207_NPC_2018_pbu763862_07.jpg?itok=9NTnzVj1 1300w, /sites/default/files/styles/max_2600x2600/public/2018-03/180207_NPC_2018_pbu763862_07.jpg?itok=MX5xQsu6 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-03/180207_NPC_2018_pbu763862_07.jpg?itok=pLOJ8xhF" alt="National People&#039;s Congress 2018" 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 lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>The People’s Republic of China has often been described as party dictatorship. But the reality on the ground, at least since the beginning of the reform era in the late 1970s, has been much more complex – with many different actors and many grey areas. This year’s National People’s Congress may enter the history books as the moment when modern China truly turned into a party-state.</span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>The Communist Party has ruled supreme ever since Mao Zedong founded the People’s Republic of China in 1949. Over the decades, this has not changed. The CCP loosened its control over the economy and society during the reform era and gave more autonomy to state organs and local bureaucracies. But pluralism was never an option, and the party always had the ultimate power to overrule the organs of the state.</span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>So why is this time any different? The answer is that up to now, China’s state organs are separate entities with clearly defined functions. Under the leadership of Xi Jinping, the party is slowly morphing into the state. Cynics might say the Xi leadership is just following the Confucian moral principle of “rectifying the names” of China’s laws and institutions, making them correspond to reality. Instead of hiding behind the façade of a pseudo-democratic state structure, it is calling a spade a spade.</span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>But this would underestimate the development of China’s state organs over the past decades. Though never truly autonomous, they were more than fig leaves, and they enjoyed considerable leeway in the implementation of central policy decisions.</span></span></span></p> <p><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>Leadership of the party will become constitutional provision</span></span></span></strong></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>This will change with the planned constitutional amendments at this year’s NPC session. They are part of a movement to weaken, if not abolish, the separation between the party and the state. On March 11, the NPC will vote to include the “leadership of the Communist Party of China” into Article 1 of the main body of the constitution, elevating it from a mere guiding principle in the preamble to a binding constitutional provision.</span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>Most debates have focused on the planned abolition of the two-term limit for the presidency Xi’s political power ambitions and his seeming break with Deng Xiaoping’s principle of collective leadership. But the office of the presidency yields less power than that of the CCP General Secretary or that of the Central Military Commission, for which there have never been official term limits.</span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>Lifting the presidential term limits is significant as part of the much larger project to merge the functions of party and state. There has been speculation in Hong Kong media that the NPC will reduce the number of ministerial level organs from 25 to 19. At its third plenum earlier this week, the CCP Central Committee debated “deepening the reform of the party and state institutions.” The structural changes this would entail have not been made public, but all signs point towards a merger of structures and positions of party and state organs at many levels of government. In light of these developments, it appears logical that the position of the President of the PRC and the position of the General Secretary of the CCP must also be held by the same person.</span></span></span></p> <p><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>Anti-corruption campaign is expanded from party members to all state officials</span></span></span></strong></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>The planned establishment of a National Supervision Commission – based on the new National Supervision Law, which is scheduled to be passed during the NPC session – is probably the most drastic step towards morphing party and state functions. This new body, meant to institutionalize Xi’s fight against corruption, will merge the leadership and functions of the CCP’s internal Central Disciplinary Commission with those of supervisory bodies at the state level.</span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>The merger, which is already underway at the provincial level, will have far-ranging consequences for a lot of people. It means that the CCP’s anti-corruption campaign can be expanded to prosecute not just party members but all state officials – from managers of state owned companies to university professors. All suspects under investigation will be subject to these new commissions’ legal proceedings, without access to civil lawyers and civil courts.</span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>This is a major step back from what decades of institutional reforms in China have achieved. The PRC is still far removed from a state witch checks and balances and an independent judiciary, but legal clarity has improved over the past years. This is being swept up in the current political streamlining process, in which the party devours the law and the state – and in which accountability is pushed out of the system.</span></span></span></p></div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <div class="field--item"> <article role="article" about="/en/team/matthias-stepan" class="team is-promoted tile-view clearfix darktile"> <a href="/en/team/matthias-stepan" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/matthias%20stepan_gross.jpg) no-repeat;background-size: cover;"> <h3> <span>Matthias Stepan</span> </h3> <div class="content"> <div class="field field--field-position">Head of Program Public Policy</div> </div> </div> </a> </article> </div> <div class="field--item"> <article role="article" about="/en/team/sabine-muscat" class="team is-promoted tile-view clearfix darktile"> <a href="/en/team/sabine-muscat" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/Sabine_Muscat_KOM.jpg) no-repeat;background-size: cover;"> <h3> <span>Sabine Muscat</span> </h3> <div class="content"> <div class="field field--field-position">Freelance Journalist</div> </div> </div> </a> </article> </div> </div> </div> </div> Wed, 07 Mar 2018 09:26:51 +0000 smuscat 6291 at A clash of cyber civilizations <span>A clash of cyber civilizations</span> <span><span lang="" about="/en/user/301" typeof="schema:Person" property="schema:name" datatype="">smuscat</span></span> <span>Tue, 02/27/2018 - 12:20</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="2018-02-28T12:00:00Z">28/02/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>Geoffrey Hoffman (<a href="">via ChinaFile</a>)</strong></p> <p><strong>Censorship and surveillance versus a free and open internet: China's ideas of cyber sovereignty are incompatible with how liberal democracies define cyberspace. Despite these inevitable conflicts, the two models could coexist in relative peace as long as governments focus on the shared goal of cyber defense.</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/2018-02/180228_Clash%20of%20Cyber%20Civilisation.jpg?itok=_4zjjnmZ 325w, /sites/default/files/styles/max_650x650/public/2018-02/180228_Clash%20of%20Cyber%20Civilisation.jpg?itok=jwWqebxG 650w, /sites/default/files/styles/max_1300x1300/public/2018-02/180228_Clash%20of%20Cyber%20Civilisation.jpg?itok=Awt6WfyT 1300w, /sites/default/files/styles/max_2600x2600/public/2018-02/180228_Clash%20of%20Cyber%20Civilisation.jpg?itok=nCWikLNE 2506w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-02/180228_Clash%20of%20Cyber%20Civilisation.jpg?itok=_4zjjnmZ" alt="Fiber-optic equipment in a data center" title="In China, a competing model of cyber sovereignty has emerged. Aleksandrs Tihonovs via 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>There has been little need for the term “cyber sovereignty” among democratic states: the Internet, by its nature, operates under an aegis of freedom and cooperation. However, as the international system <a href="">slips away</a> from American unipolarity, a <a href="">competing model</a> of cyber sovereignty has emerged in China that seeks to bind <a href="">cyber borders</a> to online censorship and surveillance. Given that democracies will always be hostile toward censorship, can these two models coexist? More importantly, should they?</p> <p>This clash has been building since at least 2010, when, in retaliation to China’s <a href="">Operation Aurora</a> cyber attacks on a large number of U.S. firms, <a href="">Google</a> and the <a href="">U.S. government</a> publicly confronted China on its Internet censorship practices. The repercussions are now widespread, including U.S. <a href="">distrust</a> of Chinese telecom companies and China’s <a href="">pressuring</a> of foreign academic journals to engage in censorship. Yet, both the Chinese and Western models of cyber sovereignty share a fundamental pillar of cyber defense, which offers a path toward a more peaceful coexistence. However, in order to understand the challenges of the two working together, it is first necessary to explore their differences.</p> <p><strong>China seeks to govern cyberspace in analogy to geographic borders</strong></p> <p>For China, the heart of cyber sovereignty is cyber borders. Last year, China’s Ministry of Foreign Affairs and the Cyberspace Administration of China jointly released a white paper, “<a href="">International Strategy of Cooperation on Cyberspace</a>,” which asserts that, as a basic norm in international relations, the principle of territorial sovereignty includes cyberspace. To that end, China seeks to govern its cyber borders similarly to its geographic borders, with the surveillance and censorship systems of the Great Firewall (GFW) serving as its cyber border wall and customs. The impetus for China’s stringent virtual private network (VPN) <a href="">regulations</a> is, in part, to strengthen its cyber borders by closing the gap in the GFW that VPNs create. However, the crackdown also exacts <a href="">certain costs</a>, such as from businesses and researchers, and knowingly allowing this toll underscores China’s commitment to cyber sovereignty.</p> <p>China’s Internet strategy is based on implementing a traditional Westphalian concept of sovereignty as absolute control over national borders. Western democracies have been groping toward a different model that is based on the sovereignty concept underlying the post-World War II liberal international order as exemplified by the United Nations, the international trading system, and the international human rights system. Under this concept of sovereignty, countries use their sovereign right to enter into agreements with one another to construct institutions that mutually restrict states’ freedom of action both toward one another and toward their own citizens. Applying this concept to the cyber sphere means attempting to establish norms, treaties, and institutions that offer collective protections, such as restricting attacks, coordinating defenses, and sharing information and tools.</p> <p>The two models have different structural strengths and weaknesses. For the Western model, upholding cyber sovereignty primarily rests on Internet freedom and cyber defense. As China’s cyber sovereignty is vulnerable to the free spread of information, its two pillars are censorship and cyber defense. The Chinese model is therefore a more difficult undertaking in the sense that it necessitates retooling the inherently free and open Internet to accommodate surveillance and censorship. Yet, it offers the advantage that censorship provides better cyber defense, and China thrives on the benefits of that coupling through its cyber borders. Alternatively, the Western model’s solution to the puzzle of how to improve cyber defense without sacrificing Internet freedoms is through international cooperation based on mutual trust and understanding. As a result, the strength of the Western model scales with the number of participants.</p> <p><strong>Clashes over censorship are inevitable</strong></p> <p>As the models continue to mature, clashes will become more frequent. Since cyber defense is not zero-sum, conflicts will revolve primarily around censorship, and each challenges the other in both passive and active ways. For the Western model, one passive force of influence is its wealth of important websites, such as for news, research, or social networking, that the GFW blocks. China attempts to counter this influence by <a href="">building its own</a> versions of these websites. Active measures include <a href="">applying</a> political pressure to improve Internet rights and the <a href="">development</a> of censorship circumvention and privacy tools. For the Chinese model, cyber borders radiate a passive effect of <a href="">self-censorship</a> over foreign websites that wish to avoid GFW blocks. Democracies, in turn, resist by <a href="">pillorying</a> websites that self-censor. Actively, China seeks a more <a href="">state-centric</a> system of governance for the Internet, and it may be testing a new approach to ask foreign websites to censor themselves.</p> <p>A recent example of this approach was China’s request of Cambridge University Press (CUP) to censor the website of its journal <em>The China Quarterly </em>for visitors from China. Disturbingly, CUP assented for several days before <a href="">reversing</a> its decision—demonstrating both the vulnerability and resiliency of open societies to this type of influence. One of China’s aims might have been to measure the resistance to its influence, but such actions engender greater mistrust. Australia, for instance, has <a href="">appropriated</a> the Solomon Islands undersea Internet cable contract from Huawei due to security concerns and fears of China’s meddling in its domestic politics, illustrating the challenges of entanglement. The CUP and Huawei examples also point to the models’ particular paradoxical struggles. China’s posture of non-interference—which led to its model in the first place—employs interference to succeed. Moreover, while a democratic state strives for cooperation in cyberspace, it does so with deep ties to Internet freedom, and these two impulses vie to guide its relationship with China in opposing directions.</p> <p><strong>Mutual cyber defense pacts with China are possible</strong></p> <p>Although in competition, the models are not wholly disparate and exclusive. China has been willing to participate in the Western model’s open-ended multilateralism; last year, for example, Canada and China <a href="">signed</a> a cyber defense pact agreeing not to conduct attacks on each other’s private sectors. Further, to a certain extent, Western states do engage in censorship and cyber border protections: the <a href="">leaked</a> U.S. National Security Council memo discussing a nationalized 5G network to guard against future threats from China offers one example. The memo’s existence also calls attention to how threats to the models may come from within: from private sector greed, for instance, such as the <a href="">dissolution</a> of net neutrality protections in the U.S., or from Chinese Internet users <a href="">resisting censorship</a>. It is also important to note that some countries take various hybrid approaches to these models, such as <a href="">Singapore</a> which engages in a high level of surveillance but not censorship. It is too early to tell whether cyber borders or cooperation will be more effective at combining security, access to necessary information, and control over potential threats, or whether the models will instead stabilize into a bipolar parity.</p> <p>The success of one model may influence the other. If the Western model eclipses China’s in cyber defense capability, it could force China to prioritize cyber defense over censorship. In these circumstances, China may be willing to open its cyber borders to some degree in order to participate more fully in cooperative protection efforts, forfeiting some facility for censorship. Conversely, deficiencies in the Western model could likewise compel democratic states to fortify their cyber borders and surrender certain Internet freedoms.</p> <p><strong>Cooperation with China risks normalizing censorship practices</strong></p> <p>Peacebuilding efforts are crucial; yet, last year, the United Nations <a href="">reached a dead end</a> in codifying a set of cyber norms to temper cyberspace’s anarchic character. Martha Finnemore recently <a href="">wrote</a>, “Contestation of cyber norms is to be expected, particularly because changing technology constantly creates new situations.” Thus, a particular difficulty with cyber norms is that they must be flexible enough to assuage fears of the unknown yet concrete enough to be meaningful. Cyber sovereignty presents an opportunity here, as it is a set of elemental cyber norms that offers a comparatively stable locus for the norm-building process.</p> <p>The issue of censorship will remain non-negotiable, both for democracies and for China. However, if—as with the Canada-China agreement—the countries focus their Internet relationship on the shared goal of cyber defense, the two models may be able to coexist in relative peace. Cyber defense norms, treaties, and institutions may yield enough common ground to mitigate, somewhat, the inevitable conflicts over censorship in the years ahead. Democratic states now face a dilemma: the door to cooperation with China on cyber defense is open, but it requires overlooking China’s domestic censorship practices, and, in doing so, hazards further normalizing these practices. On the other hand, doing nothing may widen the gulf between the models and fracture the Internet even further.</p> <p><strong>This article was first published by <a href="">ChinaFile on February 15, 2018</a>.</strong></p></div> </div> </div> Tue, 27 Feb 2018 11:20:27 +0000 smuscat 6216 at Inner-Korean entente will not change power dynamic in China’s favor <span>Inner-Korean entente will not change power dynamic in China’s favor </span> <span><span lang="" about="/en/user/301" typeof="schema:Person" property="schema:name" datatype="">smuscat</span></span> <span>Mon, 02/26/2018 - 09:19</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="2018-02-26T12:00:00Z">26/02/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><span><span><span><strong>Kim Jong-un’s Olympic olive branch to South Korea may illustrate the decline of US influence in East Asia, but it is wrong to assume that China is the beneficiary of these developments. Beijing has no better answers than Washington to deal with Pyongyang’s recalcitrance, and the Kim regime will not dance to any foreign power’s tune, certainly not China’s.</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/2018-02/180226_Korean_Unification_Flag_alexlmx_via_123rf.jpg?itok=sEeQpaIX 325w, /sites/default/files/styles/max_650x650/public/2018-02/180226_Korean_Unification_Flag_alexlmx_via_123rf.jpg?itok=vH9w9Lxl 650w, /sites/default/files/styles/max_1300x1300/public/2018-02/180226_Korean_Unification_Flag_alexlmx_via_123rf.jpg?itok=64s4Rpwk 1300w, /sites/default/files/styles/max_2600x2600/public/2018-02/180226_Korean_Unification_Flag_alexlmx_via_123rf.jpg?itok=3f-hee5Y 2508w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-02/180226_Korean_Unification_Flag_alexlmx_via_123rf.jpg?itok=sEeQpaIX" alt="Korean unification flag" title="An image of the inner-Korean entente, the Korean unification flag. Image by alexlmx via 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>After the Olympic athletes have left Pyeongchang, the world is left wondering whether South Korean president Moon Jae-in will accept the invitation to visit North Korea’s dictator Kim Jong-un, delivered by his sister Kim Yo-jong. To many observers, the inner-Korean entente appeared to be another snub to the United States in East Asia <a href=";action=click&amp;contentCollection=asia&amp;region=stream&amp;module=stream_unit&amp;version=latest&amp;contentPlacement=7&amp;pgtype=sectionfront">with the potential to open a dangerous rift between Washington and Seoul. </a>But if you believe that China will be the main beneficiary of this new round of the great Korean game, think again.</span></span></span></p> <p><span><span><span>Over the last decade or so, Pyongyang has been in the driver’s seat, bamboozling the United States and South Korea as well as China. In this way, the regime managed to survive, against the odds, extracting the resources it needed from the rest of the world, while pursuing its fiercely independent line and prolonging its bizarre communist family dynasty into its third generation. The Kim regime will dance to no-one else’s tune, not even China’s.</span></span></span></p> <p><span><span><span><strong>Pyongyang’s strategies have worked</strong></span></span></span></p> <p><span><span><span>From Pyongyang’s perspective, its strategies have worked just beautifully: they have given the regime the nuclear weapons and long-range missiles it felt it needed to guarantee its survival and to hold its own against a vastly more wealthy and successful South Korea. Pyongyang has defeated US efforts to end the Kim dynasty or at least to prevent it from developing a nuclear deterrent. The price it paid for its transgressions, economic sanctions orchestrated by the US government and the UN Security Council, has been limited: <a href="">as the most recent sanctions report by an UNSC expert committee once more shows,</a> Pyongyang so far has found it rather easy to circumvent most sanctions, and the remaining costs were born by the North Korean population, not by its leadership.</span></span></span></p> <p><span><span><span>North Korea retains a sporting chance to shape the future of the Korean peninsula – and it becomes increasingly clear that it does not even rely on Beijing for that. <a href="">China is widely believed to be the beneficiary</a> of the relative decline of US standing and influence in East Asia in recent years – a decline now hastened by the doubts about America’s reliability as an ally under President Donald Trump.</span></span></span></p> <p><span><span><span>Yet, when it comes to North Korea, the blessings of this decline for China may be rather mixed. For one, it puts the onus for dealing with the North Korean nuclear challenge and its aggressive policies squarely on China – and there are no signs that Beijing has any persuasive ideas, let alone good tools, to deal with a recalcitrant Pyongyang. <a href="">China has done just enough on sanctions</a> to be credible in expressing its displeasure with Pyongyang’s nuclear policies, but is has shied away from doing more. North Korea, therefore, has been able to expose China as a paper tiger.</span></span></span></p> <p><span><span><span><strong>North Korea will be China’s problem now</strong></span></span></span></p> <p><span><span><span>As the balance of power in East Asia shifts toward China, it becomes apparent that the North Korean nuclear program is directed not only against the United States, but at least as much against China. Pyongyang wants to <a href="">secure the survival and independence of its regime</a> and its international recognition as a power in its own right; it also wants to determine the future of the Korean peninsula against all machinations by outside powers, be it the United States, Japan – or China.</span></span></span></p> <p><span><span><span>Pyongyang views the future of Northeast Asia in different terms than Beijing. Brotherly solidarity between two nominally communist political systems was belied by the brutality with which Kim Jong-un disposed of his uncle Jang Song-thaek, who had been known as China’s man in Pyongyang. The fiercely nationalist Kim dynasty will not accept subordination under a China that wants to resume its perceived rightful place as the leading power East Asia. The fact that there are <a href="">unresolved territorial issues</a> between China and Korea around Mount Baekdu, a mountain considered sacred by Koreans and the Kim dynasty, just adds to the brew. </span></span></span></p> <p><span><span><span>Most fundamentally, however, we have to expect to see two very different, yet fiercely nationalist regimes wrestle for control over the Korean peninsula.  Whatever designs the leaders in Beijing and in Pyongyang have for Korea’s future – we can expect those designs to be difficult to reconcile. Tensions between China and North Korea can therefore be expected to rise as the great game over East Asia’s regional order enters its next phase. </span></span></span></p></div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <div class="field--item"> <article role="article" about="/index.php/en/team/hanns-w-maull" class="team is-promoted tile-view clearfix darktile"> <a href="/index.php/en/team/hanns-w-maull" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/Hans_Maull.jpg) no-repeat;background-size: cover;"> <h3> <span>Hanns W. Maull</span> </h3> <div class="content"> <div class="field field--field-position">Senior Policy Fellow</div> </div> </div> </a> </article> </div> </div> </div> </div> Mon, 26 Feb 2018 08:19:18 +0000 smuscat 6211 at Dispute settlement on China's terms: Beijing's new Belt and Road courts <span>Dispute settlement on China&#039;s terms: Beijing&#039;s new Belt and Road courts</span> <span><span lang="" about="/en/user/301" typeof="schema:Person" property="schema:name" datatype="">smuscat</span></span> <span>Tue, 02/13/2018 - 11:11</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="2018-02-14T12:00:00Z">14/02/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><span><span><span>Jacob Mardell</span></span></span></p> <p><span><span><span><strong>Beijing tries hard to sell its Belt and Road Initiative (BRI) as a “win-win” for all. But the announcement of a new Chinese-led dispute settlement mechanism will only feed suspicions that the cross-border connectivity program is negotiated entirely on China’s terms.</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/2018-02/170511_Silkroad_Train_China_Kazakhstan_pbu386233_04.jpg?itok=tsD76ccf 325w, /sites/default/files/styles/max_650x650/public/2018-02/170511_Silkroad_Train_China_Kazakhstan_pbu386233_04.jpg?itok=4TdMI0bt 650w, /sites/default/files/styles/max_1300x1300/public/2018-02/170511_Silkroad_Train_China_Kazakhstan_pbu386233_04.jpg?itok=zXaMRX0H 1300w, /sites/default/files/styles/max_2600x2600/public/2018-02/170511_Silkroad_Train_China_Kazakhstan_pbu386233_04.jpg?itok=-VXACYs6 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-02/170511_Silkroad_Train_China_Kazakhstan_pbu386233_04.jpg?itok=tsD76ccf" alt="The first international container train travelling from Jinhua city in the eastern province of Zhejiang to Kazakhstan " title="The first international container train travelling from Jinhua city in the eastern province of Zhejiang to Kazakhstan in January 2016. Image by Imagine China" 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>In the messy world of building infrastructure, legal disputes are an inevitable by-product of complex cross-border projects. China’s grand connectivity program for Eurasia and beyond – the <a href="">Belt and Road Initiative (BRI)</a> – is no exception, and in response to a <a href="">growing number</a> of BRI-related court cases, Beijing has <a href="">recently approved plans</a> to set up a new Belt and Road dispute settlement mechanism.</span></span></span></span></p> <p><span><span><span><span>According to <a href="">the</a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> proposal</span>, the <a href="">Supreme People’s Court</a> will establish “international commercial courts” in three cities: the historic Silk Road city of Xi’an, to cover the cross-continental land portion of the BRI; Shenzhen, Guangdong’s booming seaside metropolis, to cover the BRI’s maritime routes; and Beijing, to serve as the courts’ headquarters. Alongside these courts, the China Council for the Promotion of International Trade (<a href="">CCPIT</a>) will also establish a “Belt and Road International Dispute Management Center,” which will assist arbitration centers like the one already <a href="">set up in Qianhai</a>.</span></span></span></span></p> <p><span><span><span><span><strong>International arbitration on the Belt and Road</strong></span></span></span></span></p> <p><span><span><span><span>This sounds like a step towards more legal clarity. However, if parties fall out along the Belt and Road, it’s not as if they are currently without recourse. Procedures vary according to the nature of the dispute and the parties involved, but broadly speaking, local courts and <a href="">international arbitration centres</a> are well equipped to handle contractual disputes. With a functioning system and a <a href=""> sizeable community</a> of legal experts already excited about opportunities along the Belt and Road, the new dispute mechanism appears to have little raison d'etre.</span></span></span></span></p> <p><span><span><span><span>Cost is one reason cited by the Chinese side. <a href="">According to</a> prominent Chinese scholar Wang Yiwei, the current system is “complicated, time-consuming, and costly.” By creating a dedicated BRI dispute mechanism, Beijing figures that it can streamline proceedings, cut costs, and make settlement more convenient.</span></span></span></span></p> <p><span><span><span><span>But Wang’s criticism of international arbitration does not stop there. Another fault of the current system, according to him, is that it, “applies laws from Western countries and uses English as the common language.” Here, the justification for a new system finds its feet on <a href="">familiar ground</a>: the international status quo purportedly leaves China at a disadvantage. The <em>Global Times</em>, a state media tabloid under the <em>People’s Daily</em>, explicitly <a href="">states</a> that, “the existing dispute settlement regime cannot adequately protect the legitimate interests of Chinese enterprises overseas.”</span></span></span></span></p> <p><span><span><span><span><strong>A Sino-centric Belt and Road</strong></span></span></span></span></p> <p><span><span><span><span>The implication is that a dispute settlement mechanism set up under the auspices of the Supreme People’s Court will indeed protect Chinese interests. But if the new mechanism is proposed as a foil to the current international system, it is unlikely to better service international companies.</span></span></span></span></p> <p><span><span><span><span>It is difficult to anticipate the precise extent to which the new Chinese courts will abide by domestic legislation and Beijing’s direction. And it is true that Beijing is not proposing that all disputes must involve the new mechanism – many issues should be settled by the terms of any given contract – but it is easy to imagine the creation of a new status quo under Beijing’s control. Given that under the current system parties are free to choose between courts and languages, the proposed mechanism might be at odds with contractual freedom along the Belt and Road.  For a small Tajik contractor entering into an agreement with a Chinese state-owned enterprise, accepting the new mechanism might prove a difficult proposal to resist. </span></span></span></span></p> <p><span><span><span><span><strong>Rhetoric and reality: a double win for Beijing</strong></span></span></span></span></p> <p><span><span><span><span>Focusing Belt and Road litigation within Chinese borders is unlikely to please investors and politicians who share a sense that BRI is already negotiated too much on Beijing’s terms.  On his <a href="">state visit to China</a> last month, French president Emmanuel Macron warned that the modern “Silk Road” could not be “one-way” and <a href="">reminded</a> his hosts that the ancient Silk Road was “never only Chinese.” Britain’s prime minister Theresa May made a similar (if less emphatic) point when she <a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span>refused Beijing’s invitation</span></span> to officially endorse</a> the BRI. </span></span></span></span></p> <p><span><span><span><span><a href="">China’s leaders know</a> that the BRI’s success ultimately depends upon its acceptance by other countries. They are also <a href="">keenly aware</a> of the “western” perception that China is the main beneficiary of Belt and Road plans.</span></span></span></span></p> <p><span><span><span><span>Accordingly, Beijing’s <a href="">propaganda drive</a> has been intense, and the main thrust of the party’s narrative is that the BRI is an open, “<a href="">win-win</a>” initiative, designed with the purpose of cultivating a worldwide “community of a shared destiny for humankind” In Xi Jinping’s <a href="">own words</a>, the BRI is “meant to build not China's own backyard garden, but a garden shared by all countries.”</span></span></span></span></p> <p><span><span><span><span>But rhetoric does not match reality along the Belt and Road. While “win-win” is a mandatory adjective in any pronouncement on the BRI, the initiative has been much better at delivering a win for the Chinese side. The Centre for Strategic Studies recently calculated that 89 percent of Belt and Road projects are being built by Chinese companies.</span></span></span></span></p> <p><span><span><span><span>Belt and Road detractors will view the establishment of the new dispute settlement mechanism as further proof that the initiative’s primary purpose is to increase Beijing’s oversight and to further the Communist Party’s ownership of the BRI narrative. </span></span></span></span></p> <p><strong>Jacob Mardell is an intern in the MERICS program on foreign relations. He has an MA Chinese Studies from the School of Oriental and African Studies in London. He runs the blog <a href="">“The China Road.”</a></strong></p></div> </div> </div> Tue, 13 Feb 2018 10:11:16 +0000 smuscat 5731 at China's road to influence in Europe can't be a one-way street <span>China&#039;s road to influence in Europe can&#039;t be a one-way street</span> <span><span lang="" about="/en/user/301" typeof="schema:Person" property="schema:name" datatype="">smuscat</span></span> <span>Thu, 02/08/2018 - 12:55</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="2018-02-08T12:00:00Z">08/02/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><span><span><span><strong><span><span>Chinese media reports dismiss the current debate in Europe over Chinese political influencing. At the same time, their government is telling Western institutions, companies and organizations not to meddle in China’s affairs. China could be more persuasive if it allowed </span></span></strong><strong><span><span><span>open transnational exchanges</span></span></span></strong><strong> </strong><strong><span><span>and debate - rather than using opaque channels and financial leverage to broaden its influence. </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/2018-03/Li%20Keqiang_EU-China%20Summit.jpg?itok=OXkNwWdZ 325w, /sites/default/files/styles/max_650x650/public/2018-03/Li%20Keqiang_EU-China%20Summit.jpg?itok=z4R5gDVH 650w, /sites/default/files/styles/max_1300x1300/public/2018-03/Li%20Keqiang_EU-China%20Summit.jpg?itok=F4yizhOr 1300w, /sites/default/files/styles/max_2600x2600/public/2018-03/Li%20Keqiang_EU-China%20Summit.jpg?itok=lFfbz-Hj 2064w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-03/Li%20Keqiang_EU-China%20Summit.jpg?itok=OXkNwWdZ" alt="Li Keqiang at the EU-China Summit" title="Image by European Council President via flickr (CC BY-NC-ND 2.0)" 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>The debate over Chinese political influencing has raged in Australia and New Zealand for some time, but it has only just spread to Europe. A <a href="/en/publications/authoritarian-advance">new report by the Global Public Policy Institute (GPPi) and MERICS</a> has compiled many examples of China’s overt and covert attempts to gain political influence and to shape public opinion. </span></span></span></span></span><span><span><span><span><span>The <a href="">European Council on Foreign Relations</a> has also drawn attention to the issue in a study last December.</span></span></span></span></span></p> <p><span><span><span><span><span>The GPPi/ MERICS report describes how China’s economic involvement in Eastern Europe has caused countries from that region to break ranks on China policy in the European Union – from plans to increase the scrutiny of Chinese investments into strategically important sectors to statements criticizing China’s human rights record. It also shows how China tries to influence media and academic debates by buying content and funding research. The authors argue that China pursues the aim to build support for issues in its own interest and to weaken European unity. But they also claim that China seeks to promote its state-led political and economic system as an alternative to liberal democracies.</span></span></span></span></span></p> <p><span><span><span><strong><span><span>Is China “returning the favor” for Western influencing?</span></span></strong></span></span></span></p> <p><span><span><span><span><span>Chinese party-state media reactions were mixed, clearly targeting different audiences. One Chinese-language report on the <a href="">online platform “Observer” (<span lang="ZH-CN" xml:lang="ZH-CN" xml:lang="ZH-CN">观察者</span>)</a> portrayed the GPPi/MERICS study and its coverage in Germany's Spiegel magazine, as the most recent manifestation of “China threat” theories in the West. The headline in a summary of the <a href="">report in “Reference News” (<span lang="ZH-CN" xml:lang="ZH-CN" xml:lang="ZH-CN">参考消息</span>)</a>, a daily news digest that is widely circulated among and read by party-state officials, suggests that the study provides evidence of China’s growing influence and acceptance in Europe. To the paper’s main audience this would highlight the success of China’s foreign policy under Xi Jinping.</span></span></span></span></span></p> <p><span><span><span><span><span>Obviously appealing to a more international audience, English-language party-state media reacted with a mix of rejection and defensive pride. “</span></span><span><span><span>China has no desire to change the EU's political system nor does it believe it is capable of doing so,” <a href="">wrote the Global Times</a>.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>A <a href="">commentary in the same publication</a> starts by complaining about “surging Sinophobia” in the United States and Europe, but then appears to acknowledge the fact that China has indeed entered into a systemic competition with the West. Quoting Renmin University scholar Wang Yiwei, the paper writes: “Many Western media, think tanks, education organizations, foundations, NGOs and enterprises with links or sponsorships from Western governments and politicians have been trying for decades to affect China's policymaking and public opinion, and now that China has the ability to ‘return the favor,’ the West has suddenly taken offense, Wang said.”</span></span></span></span></span></span></p> <p><span><span><span><span><span>Wang Yiwei raises a legitimate point. All countries lobby for their interests and build alliances with the aim to promote their own positions and strengthen their status in international negotiations and institutions. Buying influence through foreign aid is also not unique to China. And influential nations use the tools of cultural soft power to project a positive image into foreign societies – from the Alliance Fran</span></span></span><span><span><span>ç</span></span></span><span><span><span>aise to China’s growing global network of Confucius Institutes.</span></span></span></span></span></p> <p><span><span><strong><span><span><span>Not all efforts to affect change are national interest-driven</span></span></span></strong></span></span></p> <p><span><span><span><span><span>This line of argument however also assumes that all efforts to effect change in the world are national interest-driven and that international relations are nothing but transactional. But not all Western attempts to influence public opinion in authoritarian societies have been driven by such narrow calculations. Liberal democracies are built on a shared and clearly stated belief that human rights and personal freedoms such as free access to information transcend national borders. China has yet to formulate a vision for the world that goes beyond entering into “win-win” cooperation with selected partners. And it still has to fill its newly coined foreign policy mantras such as the “community of shared destiny for mankind” (the literal translation of </span></span></span><span lang="ZH-CN" xml:lang="ZH-CN" xml:lang="ZH-CN"><span><span>人类命运共同体</span></span></span><span><span><span>)</span></span></span><span><span><span> with content.</span></span></span></span></span></p> <p><span><span><span><span><span>There are other important differences in how political influencing works on both sides, and these differences have their roots in the different systems of government. National interests are formed, communicated and reevaluated in a more transparent and pluralistic way in liberal democracies than in a one-party system. Therefore, the influencing efforts of democratic and authoritarian nations do not take place on a level playing field. As the GPPi/ MERICS report states, “Europe’s gates are wide open whereas China seeks to tightly restrict access of foreign ideas, actors and capital.”</span></span></span></span></span></p> <p><span><span><span><span><span>China’s political system in particular is off-limits for foreign actors. Scandals over allegedly Chinese-influenced parliamentarians have shaken up Australia and New Zealand. A scenario in which a foreign government could manipulate China’s tightly controlled executive or legislative institutions in a similar way is simply unthinkable.</span></span></span></span></span></p> <p><span><span><span><span><span>In the economic realm, China closely controls foreign market access to sectors it considers sensitive. In liberal democracies, such government powers don’t extend as far. Europe in particular seems rather defenseless – unlike the United States, it lacks a process for screening investments for national security implications. Efforts led by Germany, Italy and France to install such a process in Brussels have met with resistance from other member states – notably from those that had been courted by China.</span></span></span></span></span></p> <p><span><span><strong><span><span><span>Beijing uses Europe’s openness while shunning foreign actors</span></span></span></strong></span></span></p> <p><span><span><span><span><span>When it comes to influencing public opinion, the deck is once more stacked against open societies. Beijing makes full use of Europe’s openness, while increasingly shutting its doors to foreign actors. At the same time in which China has set up party-state funded think tanks and education institutions across the Western world, it has curtailed the activities of foreign civil society organizations within its own borders through a strict NGO Law. Over the past year, the CCP has also increased political control over foreign-invested companies that operate in China.</span></span></span></span></span></p> <p><span><span><span><span><span>No government of a liberal democracy can rally its media and think tanks the way the Communist party-state can do. European audiences can read the articles published on the English-language Global Times website and form their own opinion on the merits of liberal democracies versus a one-party state. Chinese citizens on the other hand are blocked from accessing many Western media sites and won't be able to read this blogpost.</span></span></span></span></span></p> <p><span><span><span><span><span>If the Chinese government wants to have a real debate over these issues it can engage with Western audiences and it should allow its own citizens to freely access Western news and social media sites. The world is waiting to hear more about how China seeks to shape it beyond putting its global power ambitions into reality.</span></span></span></span></span></p></div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <div class="field--item"> <article role="article" about="/en/team/sabine-muscat" class="team is-promoted tile-view clearfix darktile"> <a href="/en/team/sabine-muscat" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/Sabine_Muscat_KOM.jpg) no-repeat;background-size: cover;"> <h3> <span>Sabine Muscat</span> </h3> <div class="content"> <div class="field field--field-position">Freelance Journalist</div> </div> </div> </a> </article> </div> <div class="field--item"> <article role="article" about="/index.php/en/team/kristin-shi-kupfer" class="team is-promoted tile-view clearfix darktile"> <a href="/index.php/en/team/kristin-shi-kupfer" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/Kristin_ShiKupfer_Programmleiterin.jpg) no-repeat;background-size: cover;"> <h3> <span>Kristin Shi-Kupfer</span> </h3> <div class="content"> <div class="field field--field-position">Director of the Research Area on Public Policy and Society</div> </div> </div> </a> </article> </div> </div> </div> </div> Thu, 08 Feb 2018 11:55:13 +0000 smuscat 5721 at In China, Theresa May’s "Global Britain" had a date with reality <span>In China, Theresa May’s &quot;Global Britain&quot; had a date with reality</span> <span><span lang="" about="/en/user/306" typeof="schema:Person" property="schema:name" datatype="">komprakti</span></span> <span>Tue, 02/06/2018 - 10:30</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="2018-02-06T12:00:00Z">06/02/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>On her recent visit to China, Britain’s Prime Minister Theresa May got a foretaste of the difficult path ahead in carving out a new role for the UK on the world stage. Pressured to forge new trade and investment relationships with major powers like China, the UK might soon find out that it feels much less at home outside the EU than inside.</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/2018-02/180206_May_in_China.jpg?itok=rZKY6ckf 325w, /sites/default/files/styles/max_650x650/public/2018-02/180206_May_in_China.jpg?itok=NtbcyVbM 650w, /sites/default/files/styles/max_1300x1300/public/2018-02/180206_May_in_China.jpg?itok=K_eWdhY6 1300w, /sites/default/files/styles/max_2600x2600/public/2018-02/180206_May_in_China.jpg?itok=9es-Ju6d 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-02/180206_May_in_China.jpg?itok=rZKY6ckf" alt="Theresa May in China" title="Prime Minister Theresa May arrives in China, at the start of a three day visit to the country. Image by &quot;Number 10&quot; via 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><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">During her now infamous September 2017 Florence speech, Britain's Prime Minister Theresa May </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">remarked</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> that, “the United Kingdom has never totally felt at home being in the European Union.” If the Prime Minister’s recent trip to China is anything to judge by, many Brits could soon find out that outside the EU the new “Global Britain” the Tory government promotes will feel even less at home. Pressured to forge new trade and investment relationships with countries that are not only economically far more potent than the UK but also fundamentally at odds with Britain’s liberal DNA, the Prime Minister got a foretaste in China of the difficult path that lies ahead in carving out a new role for the UK on the world stage.</span></span></span></p> <p><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Ever since early 2017, Theresa May had planned on travelling to China to sound out Beijing’s appetite for a closer economic partnership – possibly even the conclusion of a free trade agreement – post-Brexit, </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">only to find out</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> that her visit was not necessarily a top priority for the Chinese Communist Party (CCP). 12 months later, with an election almost lost, no clear idea of the UK’s future relationship with the EU, and the Chinese President Xi Jinping openly challenging the “one country, two systems’” principle on various high-profile occasions, the trip had not become considerably more difficult than it was when first conceived.</span></span></span></p> <p><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">In going to China, May </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">was expected</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> to bring some good economic news home, at a time of </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">mounting concerns about Britain’s economic future</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> after EU membership. </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">She was also expected</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> to raise the issues of Hong Kong and human rights.</span> <span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">However, the Chinese state news agency Xinhua </span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">had made it known prior to May’s arrival</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> that raising such thorny issues would be “</span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">detrimental not only to China-Britain relations, but the British leader's much trumpeted image of a ‘Global Britain’.” </span></span></span></p> <p><strong>May got a strong indication of the power asymmetry post-Brexit Britain will encounter</strong></p> <p><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">On the economic side, May might praise herself for </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">managing to secure</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> business deals in the ballpark of more than </span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">9 billion GBP,</span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> of which </span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">1 billion GBP</span> <span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">will flow into the UK's strategically important service sector industry. However,</span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> this number pales compared to the </span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">40 billion GBP of deals signed on Chinese President Xi’s state visit to Britain in 2015.</span> <span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">It also remains to be seen how many of those Chinese investment promises will eventually materialize, with China’s track record on living up to its investment commitments vis-à-vis the UK </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">being anything but promising</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">. Ironically, the UK’s Trade Minister and hardcore Brexiteer Liam Fox, used the trip to China to </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">suggest</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"> that remaining within the EU during a transition period would not be an obstacle to further boosting the UK’s trade relationship with China, effectively raising the question why Brexiteers had persistently framed the EU as an obstacle to UK growing trade with the rest of the world. To make matters worse, Fox also acknowledged a fact </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">experts had pointed out in the past</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">, namely that a free trade deal with China would still be “some time away.” </span></span></span></p> <p><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">While May managed to publicly point out Chinese shortcomings on opening up key domestic markets to foreign businesses and reducing steel overcapacities – accusations that hardly raise an eyebrow in Beijing these days – her presence in China made for rather sober headlines at home. A joint UK-China review of the future trade relationship </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">was agreed</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">, but, unlike Theresa May and Liam Fox, most observers failed to recognize the significance of this announcement. Indeed, it seems doubtful that such a review will amount to much, as long as the UK’s future trade relationship with the EU is unclear. In the end, one of the</span> <span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">headline successes of May’s conversations with China’s President Xi and Prime Minister Li was </span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">a lukewarm Chinese commitment</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> to look into the possible lifting of a BSE-era ban on British beef exports to China. </span></span></span></p> <p><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">At the same time, Theresa May got a strong indication of the new power asymmetry post-Brexit Britain will encounter in its relations with major powers in the future. Behind the curtains, Beijing pushed the Prime Minister hard </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">to formally endorse BRI by signing an MoU</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">.</span> <span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">May eventually withstood the pressure, but China clearly sensed an opening. Indeed, what was remarkable about Beijing’s effort to coerce May into signing a BRI MoU was not the attempt as such but the intensity of the attempts, which Beijing had to date only employed in relation to smaller countries.</span></span></span></p> <p><strong>UK media coverage of Theresa May’s China trip was rather negative</strong></p> <p><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Hong Kong and human rights were non-issues as May attempted to secure good trade and investment news, even generating praise from the “Global Times.” </span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">In </span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">an editorial</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">, the CCP mouthpiece argued that the prime minister had wisely “sidestepped” such issues as she sought “pragmatic collaboration” between Britain and the world’s number two economy. </span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Discussing global governance issues with a fellow UN Security Council member, </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">as May had hoped for</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">, also seemed to yield rather limited interest from China.</span></span></span></p> <p><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">With UK media coverage of Theresa May’s China trip </span><a href=""><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">rather negative</span></a><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">, "Global Britain" can at least reassure itself that it has a range of previous Prime Ministers who have built strong ties with Beijing. In an interview with China Daily, </span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Tony Blair </span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">only recently seemed to praise</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"> China’s political system, when stating that, “There is a quality of debate in China that takes place at the highest levels of the political structure that doesn't happen in the same way in the West.” Blair also suggested that his own think tank could run a BRI research stream in the future. As one of the architects of ‘golden era’ in UK-China relations, David Cameron has recently </span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">taken up a senior position with a Chinese BRI investment fund</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">. Indeed, in working closely with Beijing, these UK former leaders – both of them remain campaigners before the Brexit referendum – already seem to live up to the ambitions of "Global Britain." </span></span></span></p></div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <div class="field--item"> <article role="article" about="/en/team/jan-weidenfeld" class="team is-promoted tile-view clearfix darktile"> <a href="/en/team/jan-weidenfeld" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/Jan_Gaspers.jpg) no-repeat;background-size: cover;"> <h3> <span>Jan Weidenfeld</span> </h3> <div class="content"> <div class="field field--field-position">Head of the European China Policy Unit</div> </div> </div> </a> </article> </div> </div> </div> </div> Tue, 06 Feb 2018 09:30:08 +0000 komprakti 5696 at US tax cuts might inspire more capital outflows from China <span>US tax cuts might inspire more capital outflows from China</span> <span><span lang="" about="/en/user/301" typeof="schema:Person" property="schema:name" datatype="">smuscat</span></span> <span>Wed, 01/24/2018 - 10:44</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="2018-01-25T12:00:00Z">25/01/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>With little room for tightening, Beijing lacks good options to prevent a return of capital flight. China cannot afford to match the US policy changes as lower tax rates and higher interest rates would further drive up budget deficits and debt.</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/2018-03/170215_Geb%C3%A4ude_PBOC.jpg?itok=xoA83gAK 325w, /sites/default/files/styles/max_650x650/public/2018-03/170215_Geb%C3%A4ude_PBOC.jpg?itok=RQ70lYLJ 650w, /sites/default/files/styles/max_1300x1300/public/2018-03/170215_Geb%C3%A4ude_PBOC.jpg?itok=jmW4LRD_ 1300w, /sites/default/files/styles/max_2600x2600/public/2018-03/170215_Geb%C3%A4ude_PBOC.jpg?itok=q4j9UHCV 1516w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-03/170215_Geb%C3%A4ude_PBOC.jpg?itok=xoA83gAK" alt="People&#039;s Bank of China headquarters" title="Image by victorhenry via 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>The US Republicans’ tax cuts, which recently made it through Congress and will be implemented this year, will have deep and far-ranging consequences. They will be felt even in China. The cuts will be the largest in 30 years, bringing the corporate tax rate down from 35 per cent to 21 per cent, 4 percentage points below the rate in China. The combination of lower corporate tax and expected interest rate rises by the Federal Reserve will cause investors from all over the world to chase higher returns in the United States.</p> <p>While many countries now fear an exodus of capital, this will be especially problematic for China. Capital flight will cause the exchange rate to depreciate against the US dollar, weakening China’s external purchasing power and threatening to throw its overleveraged financial system into crisis. In 2016, China experienced capital flight serious enough to force the People’s Bank of China (PBoC) to spend a quarter — 1 trillion USD — of its foreign exchange reserves to stave off the depreciatory pressure on the exchange rate.</p> <p><strong>Why it might get harder for China to stem capital outflow</strong></p> <p>Eventually, capital controls and surprisingly strong economic growth reduced the outflows. But the underlying reasons why capital was seeking to leave — a cooling economy, limited investment options and the likely prospect of rising taxes to refinance the financial system — are still unresolved. Under less favorable conditions capital controls might not be enough to keep the water in the leaky tub of the Chinese economy once the US tax cuts hit.</p> <p>There are two ways in which a country can ensure that more money flows into the system than leaves it: either capital must be locked in, or investors must be persuaded to invest in the country. China is already doing a bit of both. However, neither option is particularly attractive.</p> <p>The reasons for this lie in the financial system. The combination of slowing growth and a debt-to-GDP ratio of 255 per cent ensure that easy solutions are hard to come by.</p> <p>In the past, China has been quite successful at locking capital in by using capital controls. But such controls have limitations. The most obvious is that it is simply impossible to catch all attempts to illegally take money out.</p> <p>The second problem is that not all wealth within China is held by the Chinese. Some is held by foreign investors. By making it difficult to repatriate profits overseas, China risks deterring foreign investment and depriving its economy of capital inflows.</p> <p>There are a number of ways to render the climate for investment more attractive. China has announced new tax deductions for foreign companies that reinvest their profits in sectors of the Chinese economy that are promoted by the government. But such adjustments are minor compared with sweeping tax cuts and higher interest rates, factors that affect what investors care about the most: returns.</p> <p><strong>China can't afford lower taxes or higher interest rates</strong></p> <p>So why can’t China simply match the US policy changes? For one, China cannot afford to increase its budget deficits, as it needs to avoid a further build-up of debt. Local governments have been boosting growth by investing in infrastructure projects, often funded by semi-private financing vehicles. If taxes were lowered, local governments would be forced to borrow even more to ensure growth remains at acceptable levels. Large-scale tax cuts are not an attractive option for China’s policymakers.</p> <p>Neither is raising interest rates. The fact that the reversed repo rate (the controlling rate) was increased by only 0.05 percentage points during the ongoing deleveraging campaign shows how reluctant policymakers have been to increase rates.</p> <p>Smaller Chinese banks and financial institutions do not take in large amounts of deposits and instead often borrow short-term on the interbank market to invest in long-term projects. Given that the level of incremental GDP generated by one incremental unit of credit has fallen sharply in China in the past few years, this practice must be very widespread.</p> <p>These institutions’ investments do not always perform, which leads to the need to refinance or renegotiate short-term debt at higher rates. Rising interest rates could easily turn these institutions insolvent, potentially triggering an economy-wide crisis. It is not surprising that the PBoC has been so reluctant to raise rates.</p> <p>Once the US tax cuts and further interest rate rises are implemented, the increased returns on the other side of the Pacific will probably cause Chinese capital flight to make a comeback. The last time around, strict capital controls coupled with a strong economy and globally low rates were enough to halt the trend. But this time things might play out differently.</p> <p>The underlying issues that caused capital flight in the past are unresolved and, this time, returns on investment in other countries are not as low. Responding to the US policy changes without rocking the boat is likely to be extremely difficult.</p> <p>Beijing will probably try to manage the problem through a series of small policy changes, ranging from mini tax cuts to targeted capital controls to further tiny rate rises. The question is, will micromanagement be enough this time?</p> <p><strong>This article was first published on the <a href="">Financial Times' beyondbrics blog</a> on January 22, 2017.</strong></p></div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <div class="field--item"> <article role="article" about="/index.php/en/team/maximilian-karnfelt" class="team is-promoted tile-view clearfix darktile"> <a href="/index.php/en/team/maximilian-karnfelt" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/Maximilian_Kaernfelt.jpg) no-repeat;background-size: cover;"> <h3> <span>Maximilian Kärnfelt</span> </h3> <div class="content"> <div class="field field--field-position">Economic Analyst</div> </div> </div> </a> </article> </div> </div> </div> </div> Wed, 24 Jan 2018 09:44:17 +0000 smuscat 5436 at Why has the Chinese Foreign NGO Law become a non-issue in Europe? <span>Why has the Chinese Foreign NGO Law become a non-issue in Europe?</span> <span><span lang="" about="/en/user/301" typeof="schema:Person" property="schema:name" datatype="">smuscat</span></span> <span>Thu, 01/18/2018 - 10:16</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="2018-01-18T12:00:00Z">18/01/18</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>Worries about the future of civil society organizations in China are limited to only a handful of European countries. Others put their faith in established informal ties or have subscribed to Chinese understandings of “people-to-people exchanges,” which are unlikely to be affected by restrictions on non-governmental organizations.</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/2018-01/161116_ECPU_Flaggen.jpg?itok=M8_vUAyi 325w, /sites/default/files/styles/max_650x650/public/2018-01/161116_ECPU_Flaggen.jpg?itok=9JMg98Wt 650w, /sites/default/files/styles/max_1300x1300/public/2018-01/161116_ECPU_Flaggen.jpg?itok=YPF0KJ0q 1300w, /sites/default/files/styles/max_2600x2600/public/2018-01/161116_ECPU_Flaggen.jpg?itok=arD1sAgH 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2018-01/161116_ECPU_Flaggen.jpg?itok=M8_vUAyi" alt="Flags of China and the European Union" 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>Considering the <a href="">initial</a> outcry <a href="">surrounding</a> both the adoption and entry into force of the Chinese Foreign NGO law, Europe has become surprisingly quiet about this issue. Media attention has abated, civil society representatives remain silent, and the only recent public mention of the law at the European Union level has been one sentence in a “<a href="">Local Statement</a>” by the EU Delegation in Beijing on International Human Rights Day: “While recognising the progress made in registering foreign NGOs during 2017, we also call on China to make additional efforts to allow foreign and domestic NGOs to register and operate freely and effectively.”</p> <p>Two simple explanations for this European silence might seem plausible: The first is that implementation of the law turned out to be less draconian than expected and that the harsh Western criticism was either exaggerated or successful (or both). The second is that the EU has lost not only any leverage over China on critical issues but even its ability to speak up in defence of civil society or other self-proclaimed “values” of European foreign policy. While both explanations have some truth, a more nuanced account would highlight the structural differences among European “civil societies” as well as their implications for societal relations with China.</p> <p>Lamenting the EU’s inability to speak with one voice towards China due to diverging national interests has become commonplace in foreign policy circles. However, this “lack of unity” explanation is too simplistic when it comes to a matter as complex as the new Foreign NGO Law which actually affects a wide array of foreign organizations, from citizen associations and classical NGOs to large international foundations, think tanks, and business associations.</p></div> <div class="field field--name-field-blog-paragraphs field--type-entity-reference-revisions field--label-hidden field--items"> <div class="field--item"> <div class="paragraph paragraph--type--right-image-an-left-text paragraph--view-mode--default"> <div class="layout layout--twocol"><div class="layout__region layout__region--first"> <div class="field field--name-field-left-text field--type-text field--label-hidden field--item"> <p>It is worth taking a closer look at the nature of European “non-governmental organizations” (非政府组织) working in and with China to see why it is hard to conceive of the law as a common European problem. Contrary to what descriptions of “Western NGOs”—particularly in Chinese debates—might suggest, the characteristics of these organizations are fundamentally diverse. To start with, only a small minority of EU member states have organizations that have been formally registered so far under the new law, with four out of five coming from the EU’s “Big 3” countries: Germany, the U.K., and France. </p> <p>The picture hardly changes when looking at “Temporary Activities” filed under the new law throughout the first year—only that German organizations are even more strongly overrepresented.</p> </div> </div> <div class="layout__region layout__region--second"> <div class="field field--name-field-right-image field--type-image field--label-hidden field--item"> <a href=""> <img src="/sites/default/files/2018-01/eu_registered_office_charts.png.2_1.png" width="1289" height="614" alt="Registered NGO Offices from EU Member States" title=" (Chinafile/MPS data, as of December 15, 2017) " typeof="foaf:Image" class="img-responsive" /> </a> </div> </div> </div> </div> </div> <div class="field--item"> <div class="paragraph paragraph--type--text-whole-width paragraph--view-mode--default"> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> </div> </div> </div> </div> <div class="field--item"> <div class="paragraph paragraph--type--left-image-and-text paragraph--view-mode--default"> <div class="layout layout--twocol"> <div class="layout__region layout__region--top"> </div> <div class="layout__region layout__region--first"> <div class="field field--name-field-left-im field--type-image field--label-hidden field--item"> <a href="/sites/default/files/2018-01/eu_temporary_activities_chart.png.2%20%281%29.png"> <picture> <!--[if IE 9]><video style="display: none;"><![endif]--> <source srcset="/sites/default/files/styles/side_image_/public/2018-01/eu_temporary_activities_chart.png.2%20%281%29.png?itok=Gvazgzhf 1x" media="all and (max-width: 767px)" type="image/png"/> <source srcset="/sites/default/files/styles/side_image_/public/2018-01/eu_temporary_activities_chart.png.2%20%281%29.png?itok=Gvazgzhf 1x" media="all and (max-width: 991px)" type="image/png"/> <source srcset="/sites/default/files/styles/side_image_large/public/2018-01/eu_temporary_activities_chart.png.2%20%281%29.png?itok=M0rs_Ssq 1x" media="all and (max-width: 1199px)" type="image/png"/> <!--[if IE 9]></video><![endif]--> <img src="/sites/default/files/styles/side_image_large/public/2018-01/eu_temporary_activities_chart.png.2%20%281%29.png?itok=M0rs_Ssq" alt="Temporary Activities Filed by EU-Based NGOs" title=" (Chinafile/MPS data, as of December 15, 2017)" typeof="foaf:Image" class="img-responsive" /> </picture> </a> </div> </div> <div class="layout__region layout__region--second"> <div class="field field--name-field-right-text field--type-text-long field--label-hidden field--item"><p>These numbers give a first indication of why worries about the new law were most pronounced in Germany. Within the EU, German diplomacy was clearly the most actively committed to mitigating the effects of the law for German organizations, albeit with a strong focus on “<a href="">party-affiliated foundations</a>” (parteinahe Stiftungen). It is worth noting that these inherently political, tax-funded organizations faced massive legal problems in China at the <a href="">beginning of this year</a>, but were then suddenly registered following <a href="">intense political pressure</a> from German diplomats and politicians at all levels. This special treatment, just before Li Keqiang’s Berlin visit in late May, demonstrated the effectiveness of diplomatic pressure, but apparently also resolved Germany’s main objections with the law, potentially at the expense of other, less visible NGOs and foundations.</p></div> </div> <div class="layout__region layout__region--bottom"> </div> </div> </div> </div> <div class="field--item"> <div class="paragraph paragraph--type--text-whole-width paragraph--view-mode--default"> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-text-whole-width field--type-text-long field--label-hidden field--item"><p>Due to its strong tradition of internationally active NGOs and its long-established bilateral relations with China, the United Kingdom can certainly count as the second EU country most impacted by the Foreign NGO law. Yet, the law hasn’t visibly shaken up U.K.-China relations for several reasons. First, in contrast with U.S.-Chinese strategic competition, the overall U.K.-China relationship is dominated by trade interests. Consequently, the main British concern apparently was with the future of business and trade associations falling under the law’s purview. While registration mostly went smoothly for these trade-related organizations, the new supervision and transparency requirements could cause more headaches in the future.</p> <p>Second, the Brexit conundrum further pushes the U.K. government to pursue harmonious relations with China. This also means privileging uncontentious “<a href="">people-to-people dialogues</a>” over open support for more critical voices from society. Finally, British diplomacy didn’t have to handle a complicated issue like Germany’s party-affiliated foundations. While several large and long-established British NGOs such as Save the Children, ClientEarth, and Health Poverty Action managed to get registered early on, other more contentious U.K.-based NGOs—Amnesty International in particular—have long preferred to operate from Hong Kong to avoid pressure from Chinese authorities.</p> <p>The strong bias towards Germany and Britain in official statistics does not mean that other European countries have no non-governmental entities working in and with China. But unlike their Northern European counterparts, those from France, Italy, and Spain are apparently opting for a more informal, continuity-based approach, which rests on avoiding the bureaucratic burdens of formal registration while relying on well-established personal contacts and the mutually perceived need for informal exchanges. In France, for instance, those non-trade organizations registered so far focus on culture, sports, and education, while many other foundations engaged in Sino-French societal exchanges enjoy the backing of high-level diplomats or former politicians. One prominent example, among others, is former Prime Minister Jean-Pierre Raffarin, who is engaged in several organizations operating in and with China <a href="">without formal registration to date</a>. Whether such an informal approach will continue to work once the <a href="">unofficial</a> one-year “grace period” for registration has ended remains to be seen. As of late 2017, however, the view that “nothing has fundamentally changed” and that “it has always been difficult to work in China” seems to prevail in France, Italy, and Spain among civil society representatives and diplomats.</p> <p>The situation in Central and Eastern European (CEE) countries is yet again entirely different. When it comes to state-society relations, and particularly the history and status of NGOs in the political system, many of them tend to share more common experiences with China than they do with their Western European neighbors. With domestic civil society largely oppressed during the communist past, there is no denial that the rapid growth of an active third sector since the 1990s has been supported by U.S. and EU funding in both “communist” China and post-communist Europe. Consequently, scapegoating of civil society is an easy means of rallying nationalist support in both contexts.</p> <p>Hungarian Prime Minister Victor Orbán’s <a href="">infamous denunciation of NGOs</a> as “paid political activists who are attempting to enforce foreign interests” is certainly an extreme example, which should not be allowed to overshadow the seminal role played by homegrown, bottom-up social movements in communist Europe (as well as China) in the 1980s. But the shared depiction of civil society as a “Western” concept helps understand why most Eastern EU member states have no issue with China’s stricter regulation of civil society organizations. For one, they are home to few or no internationally active NGOs whose activities could be directly affected by Chinese laws. For another, most CEE countries’ bilateral relations with China have evolved in a purely intergovernmental manner which is fully in accordance with Beijing’s understanding of “people-to-people exchanges,” i.e. top-down-initiated, government-controlled bilateral exchanges mainly dealing with “soft” topics like culture, education, or tourism. Furthermore, from a Chinese domestic perspective, the Foreign NGO Law’s primary purpose was to regulate “Western” NGOs, whereas CEE countries fall under the framework of “South-South Cooperation,” supposedly excluded from strategic competition.</p> <p>With many of the EU’s central and eastern member states <a href="">additionally enchanted</a> by the lofty investment promises of China’s Belt and Road initiative and keen on further developing the Beijing-initiated “16+1” cooperation format, the EU’s shrinking capacity to act on potentially controversial issues seems hard to negate. But even without such deft Chinese diplomatic exploitation of Europe’s internal divisions, the sheer diversity of country-specific situations regarding relations with China requires far more internal EU coordination and mutual trust-building between Europeans before they will be able to speak with one voice on issues such as the Foreign NGO Law.</p> <p><strong>This article was first published on </strong><a href=""><strong>January 3, 2018 by the China NGO Project</strong></a><strong>, an initiative by our partner organization ChinaFile.</strong></p></div> </div> </div> </div> </div> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <div class="field--item"> <article role="article" about="/en/team/bertram-lang" class="team is-promoted tile-view clearfix darktile"> <a href="/en/team/bertram-lang" rel="bookmark"> <div class="tile-view-wrapper" style="background-color: ;background: url(/sites/default/files/2017-07/Bertram_Lang_0.jpg) no-repeat;background-size: cover;"> <h3> <span>Bertram Lang</span> </h3> <div class="content"> <div class="field field--field-position">Policy Fellow</div> </div> </div> </a> </article> </div> </div> </div> </div> Thu, 18 Jan 2018 09:16:48 +0000 smuscat 5396 at