Beijing bawls at beefy US$2 billion arms sales to Taiwan
Britain declares ‘95%’ of business with Beijing as safe; and Peru forgets to read the small print on PRC mega port on its shores
Observing China is the essential newsletter to understand the UK-PRC relationship, explained in the context of global developments.
Over the past week, His Majesty’s (HM) Government has finally got the ball rolling with setting the scene for the United Kingdom’s (UK) relationship with the People’s Republic of China (PRC) under a new leadership. David Lammy, Foreign Secretary remained true to his word and raised some of the thorny issues with his counterpart on his recent trip to the PRC (such as the treatment of Uyghurs in Xinjiang and the detaining of Jimmy Lai, Hong Kong pro-democracy activist and British citizen).
Lammy defended HM Government’s intention to boost bilateral trade ties by claiming that ‘95%’ of business is safe to conduct with the PRC. It would be encouraging to know which areas he deems secure, and what framework his assessment will use, because there are countless examples of Beijing cooperating with countries on seemingly harmless technologies later discovered to be used for nefarious purposes by the Chinese Communist Party (CCP).
Are we still right to be concerned about HM Government’s clarity of vision in rebuilding ties with the PRC?
Let’s have a look at this week’s Observing China.
1.1 PRC state-owned shipping company gains exclusive operating rights to Peruvian megaport
In 2019, Peru signed a contract for COSCO Shipping, a PRC state-owned enterprise, to build the first port on the South American Pacific coastline large enough to berth the world’s biggest container ships. But Lima didn’t realise that they were also abnegating their exclusive rights to operate the port to the PRC.
When the Peruvian Government tried to extricate itself from the asphyxiating clause, COSCO Shipping took them to court, and Peru cowered away.
All PRC companies (particularly state-owned ones) are legally bound to comply with security orders issued by Beijing and the People’s Liberation Army (PLA). In theory, the Peruvian port could become a naval base for the Chinese Navy.
1.2 Beijing offers Taliban government tariff-free imports into the PRC
As Beijing seeks to insulate its critical minerals supply chain from free and open countries’ efforts to enforce fair and balanced trade, it has offered Taliban-controlled Afghanistan tariff-free imports into the PRC of lithium, copper and iron.
Beijing has all but formally recognised the repressive, authoritarian regime in the knowledge that doing so would rouse international concern. Earlier this year, Xi Jinping, General Secretary of the CCP, welcomed Asadullah Bilal Karimi, the Taliban-appointed Afghan Ambassador to the PRC.
The US has seen a mutation of the PRC state-back cyberattacks discussed in our 10th October newsletter. Even after the US Government called out the attacks, experts believe that the same actors infiltrated the phone lines of former President Donald Trump, JD Vance, his running mate, and individuals associated with Vice President Kamala Harris’ presidential campaign.
As experts point out, the days preceding an election are the most vulnerable to attack, given the lack of time available to respond.
On 25th October, the Pentagon announced a US$2 billion in arms sales to Taiwan, including three of the National Advanced Surface-to-Air Missile Systems (NASAMS), highly coveted since their battle-testing in Russia’s war against Ukraine. Within a day, the Taiwanese Ministry of Defence reported a PLA patrol around the island. This is typical of Chinese naval and ground forces, following arms sales announcements to Taiwan, or political moves seen as acts of recognition of the disputed island, such as the visit of Nancy Pelosi, former US House of Representative Speaker, to Taipei in 2022.
1.5 South Africa asks Taiwan to relocate its de-facto embassy in presumed PRC appeasement
The Taiwanese Foreign Ministry has rejected South Africa’s ‘non-negotiable’ order for its de facto embassy to relocate from the administrative capital of Pretoria to the commercial centre of Johannesburg. In effect, this would presume the consulate as downgraded to a mere trade office.
Ronald Lamola, Foreign Minister of South Africa, communicated the order during his attendance at the China-Africa summit, which was discussed in our previous newsletter.
Following the summit, a joint statement was issued to announce the Establishment of an All-Round Strategic Cooperative Partnership in a New Era. The statement claimed that Taiwan was an inalienable part of China.
1.6 CCP repeatedly requests the US declare ‘opposition’ to Taiwanese independence
According to two US officials familiar with a private conversation held between Xi and Joe Biden, President of the US, last year in San Francisco, Xi requested that the US change its wording around Taiwan independence. The current official wording from the US is that it ‘does not support’ Taiwanese independence and Xi has been asking repeatedly for it to become ‘we oppose Taiwanese independence’. By attempting to coerce the world’s largest economic and diplomatic power into verbal submission, the CCP’s mission to shape the global narrative to justify its expansionist aspirations is becoming increasingly clear.
1.7 South Korean semiconductor employee arrested on suspicion of espionage in PRC
Beijing has detained a South Korean citizen working for a Chinese semiconductor company in the eastern province of Anhui on suspicion of violating the country’s anti-espionage law. The arrest comes as South Korea realigns closer to the US and Japan. The detainee is a former employee of Samsung Electronics and is accused of passing on sensitive technological information to his home country. Revisions of the PRC’s counter-espionage law in 2023 permitted a broad and vague definition of espionage, and caused international concern for its potential use as a diplomatic tool.
1.8 Xi rallies to reach economic growth target by end of the year
Following the PRC’s lowest economic growth figures since the first quarter of 2023, Xi has called on multiple layers of the government to prioritise economic growth, from Standing Committee members to provincial leaders. With such a full-scale push, analysts believe the CCP’s annual growth target of approximately 5% is achievable, but that the PRC’s long-term economic transformation faces significant challenges.
2.1 This report by the Centre for New American Security compares the numbers of sanctions and export controls imposed on PRC individuals and entities under the Biden and Trump administrations.
2.2 A piece by the Centre for Strategic and International Studies explains the implications for the PRC of North Korea sending troops to assist Russia in its illegal war against Ukraine. Lammy raised this topic during his recent meeting with Wang Yi, Foreign Minister of the PRC.
3.1 Chancellor of the Exchequer embraces investment from the PRC
On 25th October, Rachel Reeves, Chancellor of the Exchequer, stated that she ‘welcomes’ investment from the PRC in many industries across the UK. Reeves conceded it is not prudent to allow Chinese investment in areas such as nuclear energy, nor to rely on Beijing for our basic needs. But the dominant message is that investment is welcome, and this idea is being sold to the British public by citing employment and trade opportunities.
While there may be short-term benefits to increased trade, one hopes Reeves does not lose sight of the economic coercion tactics which the CCP is known to employ.
3.2 Starmer confirms Royal Navy expansion in the Indo-Pacific
On 26th October, Sir Keir Starmer, Prime Minister, announced that HM Government will expand the Royal Navy’s presence in the Indo-Pacific and execute more joint patrols with Pacific Island nations. In a statement, Sir Keir emphasised Britain’s commitment to upholding regional prosperity and security – both for national interests and to maintain the country’s role as an essential peacekeeper. A welcome signal, but no new deployments.
The UK’s current heavy reliance on the PRC for critical mineral imports leaves the country’s supply chain vulnerable to political weaponisation by the CCP, as demonstrated last year with the retaliatory export controls imposed on germanium. In order to decrease British dependence, Starmer announced that UK importers of critical minerals such as lithium, granite and cobalt will receive financial subsidies.
This strategy ties in with HM Government’s aspirations to build closer ties with Commonwealth countries, particularly in the Indo-Pacific, which are ‘crucial’ to regional security as they are geographically closer to an ever-assertive PRC. For example, under the new agreement, British companies – such as Cornish Lithium – will be encouraged to import from countries such as Australia.
3.4 HSBC splits operations into ‘east’ and ‘west’, separating UK and Hong Kong
The banking giant – headquartered in London but most profitable in Asia – states that there are no geopolitical motivations for its governance split, which will reduce UK regulatory oversight over its Asia operations. PRC insurance giant Ping An, the largest HSBC shareholder, initially advocated for this split last year, but it was rejected. Concerns have been raised whether the motive behind this split is to reduce criticism of questionable practices in the bank’s greater China region, such as the freezing the accounts of Ted Hui, a pro-democracy Hong Kong lawmaker, upon his arrival in Britain.
4.1 Expansion of BRICS necessary to achieve global harmony and prosperity, says Xi
Vladimir Putin, President of Russia, and Xi exuded confidence at the BRICS summit last week, suggesting that the group – along with existing members and the so called ‘middle ground’ countries in Africa, Asia and Latin America – will fortify their challenge of the ‘status quo in global governance.’
This Global Times piece clearly states the aim of BRICS+ countries to ‘introduce alternatives to the tools that maintain the West-dominated international order.’
Some of the ‘tools’ used by the PRC include the well-known large-scale investments into developing countries, which consequently allow the CCP to dictate how their beneficiaries vote in international fora on issues such as Taiwan. Beijing’s implementation of police force training programmes and surveillance systems in African countries, based on intrusive civilian monitoring, are lesser-known cases of how the CCP continues to expand undemocratic practices on a global scale.
Free and open nations should commit to a strategy to counter authoritarian influence, particularly in ‘middle ground’ countries, when revisionist authoritarians such as the PRC are launching a systematic, whole-of-state campaign to realign the international order.
4.2 PRC and Vietnam agree to ‘military-to-military’ bilateral cooperation
In a continued deepening of cooperation between the two countries, Beijing and Hanoi will reinforce their military cooperation, in light of ‘the international and regional situation.’ Zhang Youxia, Vice Chairman of the Central Military Commission of the PRC, announced the PRC’s commitment to bring the two countries’ ‘shared future to a new level.’
Although Vietnam and the PRC continue their territorial claims dispute in the South China Sea, the enhanced military cooperation speaks to a long-term CCP strategy of strengthening regional alliances as it faces increased pushback from the US and the Philippines for its maritime aggression. It is therefore necessary to understand what the military cooperation between Vietnam and the PRC means for these disputed waters and for wider regional security.
Gray Sergeant, Research Fellow in the Indo-Pacific at the Council on Geostrategy, writes:
British parliamentarians’ awareness of and interest in cross-strait developments has increased significantly in recent years. Taiwan has gone from being seen as a mere post-Brexit trade opportunity to a thriving liberal democracy on the front line of the struggle against authoritarianism. Last year’s Indo-Pacific report by the Foreign Affairs Committee covered Taiwan at length, making headlines with its apparently remarkable observation that Taiwan is, indeed, an ‘independent country’.
Following Lammy’s trip to Beijing last week, the momentum continues. Backbenchers on both sides of the House had questions about Taiwan. During Monday’s Urgent Questions, parliamentarians raised concerns about alleged Foreign, Commonwealth and Development Office (FCDO) efforts to delay the visit of Tsai Ing-wen, former President of Taiwan, to the UK and pushed Lammy for further details about what he said to his Chinese counterpart in relation to Taiwan.
On the first of these, when directly asked if ‘his officials play[ed] any part in the decision’, Lammy said it was a ‘caricature’ which: ‘I do not recognise…I really do not’ (so not a ‘no’). On the other, the foreign secretary told parliamentarians that he regards cross-strait issues as ‘very serious’, that he is ‘very concerned about an escalatory pattern of behaviour’ in the strait, and that he specifically discussed this ‘aggression’ while in the PRC.
A welcome clarification, no doubt, but it is still unclear why Taiwan was missing from the FCDO’s readout of the talks…
While HM Government has challenged the PRC in certain areas over the past week, inconsistency remains around Taiwan, as seen in Gray Sergeant’s comment above. When Lammy mentioned the mistreatment of Uyghurs in Xinjiang, his counterpart Wang Yi said that Lammy appeared to be ‘confused’. This type of gaslighting is common in PRC diplomatic practice and communicates to the interlocutor that a constructive conversation on the topic will not follow.
The developments covered in this newsletter, from Peru to South Africa, should serve as a constant reminder to any democratic government that the PRC is employing a systemic strategy to expand its influence territorially, diplomatically and economically.
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Grace Theodoulou – Policy Fellow, China Observatory
Email: grace@geostrategy.org.uk
If you would like to explore any of the Council on Geostrategy’s PRC-focused research papers, click here to visit the China Observatory.