Chinese mega-embassy tests Labour
..and China's Olympics near miss, CCP plans digital ID, Royal Navy shadows Chinese warships
Hi everyone, and welcome back to the first newsletter of August. Due to research commitments, there will be just one edition of Observing China per week for this month.
So, the fortnight of sporting brilliance brought to us by the 2024 Paris Olympics came to a conclusion over the weekend, with the People’s Republic of China (PRC) narrowly missing out on first place to the United States (US). The superpowers were tied for Gold medals in the PRC’s strongest overseas Olympics performance to date, though the US edged ahead overall. Nonetheless, some Chinese netizens are celebrating the Games as a win for China by factoring in medals from Hong Kong and Taiwan, regions claimed by the Chinese Communist Party (CCP).
Additionally, if you have been missing news from the CCP leaders recently, it is because they have been taking a break from the Party line to wiggle their toes in Bohai sands. Every August, Chinese leadership escape the heat of Beijing to an annual summer retreat in Beidaihe (北戴河). A tradition established by Chairman Mao Zedong, the Beidaihe trip traditionally gathered CCP elders and policymakers to hash out major political and economic policies. Xi’s personal consolidation of power has changed this to more of a tanning holiday. Let’s jump in:
1.1 Chinese government plans for digital ID system
The Chinese government is pushing for a digital identification system which would centralise online verification, ostensibly to protect consumer privacy from technology companies. Critics fear that it will further tighten government control over internet activity.
1.2 Royal Navy monitors Chinese ships in UK waters
The Royal Navy’s HMS Richmond (a Type 23 frigate) escorted Chinese warships Jiaozuo and Honghu during their passage through UK waters on the way to-and-from Russia. British ministers praised the operation as an assertion of British sovereignty and naval vigilance.
1.3 HP plans to shift production away from China
HP is aggressively relocating over 50% of its computer production from the PRC to other regions, with Thailand emerging as a key destination. HP is further establishing a backup design hub in Singapore, reflecting its efforts to mitigate risks associated with a potential invasion of Taiwan by Beijing.
1.4 British Airways to drop flights to Beijing due to Russian airspace ban
British Airways will suspend its flights to Beijing from October. The ban on flying over Russian airspace has led to longer, more expensive flights which are no longer economically viable. This follows a broader trend of reduced air traffic between Europe and the PRC, with Chinese airlines gaining a competitive edge by still being permitted to fly over Russia.
1.5 Chinese 'super-embassy' plans for near Westminster
Beijing has revived a proposal to construct a ‘super embassy’ in London, resubmitting the plans shortly after Labour came to power. Plans for the embassy, which would be ten times larger than the PRC’s current diplomatic base, are set to challenge the new government’s diplomatic strategy towards the PRC. This would be a matter of potent symbolic influence for Beijing.
1.6 China legislates over deep-sea interests
Beijing is advancing national security legislation to protect its sub-sea interests, viewing the deep sea as a new frontier in its rivalry with the US. This legislation aims to safeguard China’s subsea assets, such as communication cables, and to reinforce its presence in increasingly militarised deep sea areas
1.7 US overtakes China as Germany’s top trading partner
As of mid-2024, the US has become Germany’s largest trading partner, overtaking the PRC, with a total trade volume of approximately €127 billion (£108.7 billion). Broadly, the shift reflects Berlin’s ongoing strategy to reduce economic dependence on Beijing.
1.8 New Chinese company law explained
The PRC’s new company law reforms, implemented in July, tighten control over businesses by requiring founders to meet capital commitments within five years and by holding company directors more accountable to creditors and consumers. The law also mandates worker representation on boards, and potentially affords Communist Party cells more influence within companies, including multinationals.
1.9 Chinese Olympics victories stir nationalist sentiment
Chinese victories at the Paris Olympics have stirred nationalist fervour, with achievements in swimming and tennis viewed as proof of the PRC’s ability to challenge the great democracies. The doping allegations levelled against Chinese athletes are dismissed by many as a Western smear campaign.
2.1 UK China Transparency has released a report detailing the funding behind King’s College London’s (KCL) Lau China Institute. The report alleges that the principal donor, Lau Ming-wai, has connections with the CCP’s United Front Work Department and has promoted Hong Kong’s integration with the PRC.
2.2 George Magnus, member of the China Observatory’s Advisory Board, has published an article with LSE Blogs, providing additional insights into the PRC’s recent Third Plenum. The Plenum reinforced the alignment of national security with economic strategy, yet offered little in terms of solutions for the systemic economic problems which jeopardise the PRC’s future growth.
2.3 War On the Rocks has published an article about Chinese ‘shadow reserves’ of US dollar holdings, which have been transferred from the PRC’s central bank to other parts of its financial system. These reserves will frustrate Washington’s ability to impose effective sanctions in a geopolitical crisis.
3.1 Following the meeting between David Lammy, Foreign Secretary, and his Chinese counterpart, Wang Yi, in Laos last month, Lammy is preparing to renew high-level diplomatic discussions with a trip to the PRC in September.
4.1 In pointed response to the doping allegations which have plagued the Chinese Olympic delegation, the PRC’s central authorities sent the following congratulatory message to its athletes:
You have vigorously promoted the Chinese sports spirit and the Olympic spirit, striving to win medals not only for your athletic performance but also for your moral integrity, sportsmanship, and clean competition.
The message also added:
Your outstanding achievements and performances have further ignited the patriotism of Chinese people both at home and abroad, uplifted the national spirit, and united the people towards progress.
4.2 On 8th August, Xinhua published an article which details Aberdeen’s welcoming of greater cooperation with the PRC, particularly as the Scottish city advances its transition to renewable energies.
Chinese ambassador to the United Kingdom, Zheng Zeguang, highlighted the broad prospects for collaboration in energy transition, green and low-carbon development, trade, education, and tourism during a meeting with the Aberdeen City Council. He expressed that China welcomes Aberdeen's move to strengthen exchanges and expand cooperation with Chinese cities, leveraging each other's strengths to achieve their respective economic and social development goals.
Gray Sergeant, Research Fellow on the Indo-Pacific at the Council on Geostrategy, writes:
Winning Taiwanese hearts and minds is a prerequisite if Beijing hopes to achieve peaceful unification. Yet coercive measures to deter Taiwan from formalising its independence (also a necessity for the CCP) undermine such efforts.
One way to minimise the costs of coercion is for Beijing to target its punitive actions. This includes steps in 2021 and 2022 which singled out Democratic Progress Party figures for sanctioning, including prominent players in the current administration. As well as a more recent threat to impose the death penalty for ‘diehard’ separatists.
The launch by the PRC’s Taiwan Affairs Office of a dedicated web-page listing ‘Taiwan Independence diehards’ (台獨頑固分子) last week formalises these previous moves. It also provides an email address for reporting separatist crimes – no doubt new names will appear. Analysts in Taiwan also believe the creation of this list may be an attempt to reassure the Taiwanese populace that Beijing only seeks to punish a handful of people.
Yet broad brush measures seem to be continuing. Recently, Taiwan’s Ministry of Foreign Affairs has accused the PRC of pressuring countries to end preferential visa privileges for Taiwanese citizens (the number of countries offering such privileges has declined to 166, down from 171 at the end of 2023). This includes Columbia’s decision to cancel visa-free entry to visitors from Taiwan. If Beijing is behind such moves and aims to break the will of the Taiwanese people through international isolation, then it is only likely to backfire by breeding resentment.
That’s all for this week from a sweltering London. Thanks for reading everyone!
- Liddy
(reach me at: elizabeth@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.