Curdling relations: Beijing lashes out at EU dairy
...and Chinese premier and PLA visit Moscow, wealthy Chinese buy up Manchester flats, Beijing’s space trash
Hello everyone, the time is now to catch up on what’s been happening in the People’s Republic of China (PRC) this past week. Welcome back to Observing China. So, Chinese leaders have just commemorated the 120th anniversary of Deng Xiaoping’s birth. Deng, (pronounced Dung in English), has been widely hailed as the architect of the PRC’s remarkable economic transformation. Though a committed communist, Deng adopted a pragmatic approach to governance which prioritised economic development over ideological purity, encapsulated in his famous quote: ‘It doesn’t matter whether a cat is black or white, as long as it catches mice.’ [不管黑猫白猫, 能捉到老鼠就是好猫]
Deng redefined socialism to introduce elements of a capitalist market economy while still maintaining the rule of the Chinese Communist Party (CCP), coining the term ‘socialism with Chinese characteristics.’ [中国特色社会主义]
Jake Sullivan, National Security Adviser of the United States (US), is in Beijing today until Thursday, a trip which has been interpreted as laying the groundwork for another summit between Joe Biden, President of the US, and Xi Jinping, General Secretary of the CCP. Now let’s jump into the news.
1.1 Putin meets Chinese premier, reaffirms Russia-China golden era
On 21st August, Li Qiang, Premier of the PRC, met with Vladimir Putin, President of Russia, in Moscow. The leaders celebrated strengthening political and economic ties between Russia and the PRC, and committed to deepening bilateral cooperation. While Beijing purports to maintain neutrality in Russia’s invasion of Ukraine, its growing alignment with Russia reflects a shared desire to reshape global power dynamics away from perceived ‘Western’ dominance. Li also signed over a dozen agreements including investment and transport cooperation with Mikhail Mishustin, Prime Minister of Russia.
1.2 Chinese army visit Moscow, discuss military cooperation
On 22nd August, a People’s Liberation Army (PLA) delegation led by Li Qiaoming, Commander of the PLA’s Ground Forces, arrived in Moscow for a meeting with Colonel General Alexander Fomin, Deputy Minister of Defence of Russia. The two sides discussed topics of mutual interest regarding military cooperation.
1.3 China launches tit-for-tat trade probe into EU dairy products
In retaliation to the European Union’s (EU) revised decision regarding tariffs on Chinese Electric Vehicles (EVs) (now to be 37.6%), Beijing has announced an anti-subsidy investigation into dairy imports from the EU. The probe will target 20 subsidies across the bloc and focus largely on cheese, cream and milk products. With the PRC as the EU’s second-largest market for its dairy exports, EU officials plan to defend its subsidies and compliance with World Trade Organisation (WTO) rules.
1.4 Beijing launches IP financing push, boosts lending to tech start-ups
Beijing is increasing lending to tech start-ups and small businesses by using intellectual property (IP) as collateral, aiming to revive credit growth in the PRC’s slowing economy. In the first half of 2024, IP-pledged financing loans jumped 57% compared to the previous year – reflecting Beijing’s push to support innovative companies which lack traditional assets. This approach includes incentives such as interest rate subsidies and leeway for non-performing loans.
1.4 Beijing announces 6 month ban on PwC for Evergrande scandal
PwC China is preparing for a six-month ban starting in September, imposed by Chinese authorities due to its audit work for the collapsed property developer Evergrande. This potential suspension represents one of the harshest actions taken against a ‘Big Four’ accounting firm in the PRC.
1.5 Chinese space junk practice causes concern in the US
The breakup of a Chinese Long March 6A rocket in space after satellite launches has propelled hundreds of pieces of debris into orbit, raising growing concerns about Chinese practices regarding space junk. This incident follows Beijing’s increased rocket launches for scientific and military purposes. American officials have urged the PRC to address these issues and engage in international discussions on space sustainability.
1.6 Chinese semiconductor gear imports reach record high
The PRC has significantly increased its imports of semiconductor manufacturing equipment, setting a new record of US$26 billion in the first part of 2024. This surge comes as Chinese companies stockpile machinery from international suppliers, anticipating further restrictions from the US and allied nations. By focusing on less advanced but unrestricted equipment, Beijing aims to enhance its semiconductor production and continue reducing its reliance on foreign technology.
1.7 Secret diplomatic backchannel between US and China exposed
The United States (US) and the PRC have maintained a discreet diplomatic channel, with key meetings between Sullivan and Wang Yi, Foreign Minister of the PRC, held in cities including Vienna, Malta and Bangkok . This backchannel has facilitated in-depth discussions on contentious issues such as Taiwan, US export controls, and Beijing’s stance on the Kremlin’s actions in Ukraine. Although fundamental issues remain unresolved, this ‘strategic channel’ has contributed to the stabilisation of relations between the two superpowers during a particularly volatile period.
1.8 Chinese landlords capitalise on taxpayer-funded Manchester flats
In Manchester, luxury apartments financed by taxpayer loans are being sold to Chinese investors. The Greater Manchester Combined Authority, led by Andy Burnham, has granted substantial loans to developer Renaker, whose properties are being marketed to wealthy Chinese buyers in Hong Kong. What’s happening to Labour’s promise to curb foreign ownership?
2.1 The Institute for the Study of War has released a report which explores a hypothetical PRC short-of-war campaign to seize Taiwan’s outlying Kinmen islands, and scenarios for allied responses.
2.2 The Centre for Research on Energy and Clean Air has published a report which shows that Beijing issued no new coal-based steelmaking permits in the first half of 2024 – instead opting for electric arc furnace (EAF) projects to drive decarbonisation.
2.3 The Australian Strategic Policy Institute (ASPI) has published a report by Anne-Marie Brady examining Beijing’s covert influence and interference campaign in New Caledonia. The report details the CCP’s long-standing efforts to influence political and economic elites.
3.1 Keir Starmer and Xi Jinping speak on the phone
On 23rd August, Keir Starmer, Prime Minister of the UK, had a phone call with Xi. The two leaders discussed shared priorities such as trade, economic stability, and cooperation on global issues such as climate change and security, while the prime minister also added that: ‘ he hoped the leaders would be able to have open, frank and honest discussions to address and understand areas of disagreement when necessary, such as Hong Kong, Russia’s war in Ukraine and human rights.’
Both leaders emphasised the importance of maintaining a stable UK-China relationship and open dialogue.
3.2 UK shelves Free Speech act for universities, worries about losing Chinese funding
Bridget Phillipson, Education Secretary of the UK, has shelved the proposed Higher Education (Freedom of Speech) Act 2023, partly due to concerns of British universities that the Act would complicate operations in authoritarian states such as China. Phillipson cited worries that the law could lead to costly legal challenges and negatively affect vulnerable groups, while university vice chancellors expressed fears over the implications for their international operations and funding. This motivation was not disclosed at the time of the announcement.
It’s no secret that universities in the UK are heavily dependent upon Chinese funding – however, surely the Government should operate with transparency when core British values are at stake…?
It should go without saying that free speech is vital to academic and democratic integrity. I for one would like to see those conversations between the universities’ vice chancellors and His Majesty’s (HM) Government – and hear the processes of reasoning behind this decision. It’s beginning to look more and more like HM Government is retracing its steps down the Yellow Brick Road of the Golden Era.
4.1 After Li’s visit to Russia to meet with Putin, he travelled to Belarus. On August 22nd, the Chinese premier met Alexander Lukashenko, President of Belarus, at the Independence Palace of Belarus. There, he said:
李强指出,中方将继续坚定支持白俄罗斯走符合本国国情的发展道路,愿同白方加强发展战略对接,扎实推进各领域合作,稳步扩大贸易规模,实施好中白工业园等项目,持续深化人文交流。中方愿同白方进一步加强多边协作,共同弘扬和平共处五项原则,倡导平等有序的世界多极化和普惠包容的经济全球化,推动全球治理体系朝着更加公正合理的方向发展,维护广大发展中国家共同利益。
Li Qiang pointed out that China will continue to firmly support Belarus in following a development path that suits its national conditions. China is willing to strengthen the alignment of development strategies with Belarus, solidly advance cooperation in various fields, steadily expand trade scale, effectively implement projects such as the China-Belarus Industrial Park, and continuously deepen cultural and people-to-people exchanges. China is also willing to further enhance multilateral cooperation with Belarus, jointly uphold the Five Principles of Peaceful Coexistence, advocate for an equal and orderly world multi-polarisation, promote inclusive and universal economic globalisation, and push the global governance system towards a more just and reasonable direction, safeguarding the common interests of developing countries.
4.2 During the CCP’s Commemoration of Deng’s 120th birth anniversary, Xi emphasised that:
…对邓小平同志最好的纪念,就是把他开创的中国特色社会主义事业继续推向前进。我们要紧紧围绕以中国式现代化全面推进强国建设、民族复兴伟业这个中心任务,继往开来,奋发进取。要坚持守正创新,进一步全面深化改革,不断为中国式现代化提供强劲动力和制度保障。要紧紧抓住高质量发展这个首要任务,完整准确全面贯彻新发展理念,统筹推进“五位一体”总体布局、协调推进“四个全面”战略布局,加快建设现代化经济体系,推进高水平科技自立自强,大力发展社会主义先进文化,形成物质文明和精神文明相协调、人与自然和谐共生的良好局面。要坚持人民至上,发展全过程人民民主,建设更高水平的法治中国,坚持在发展中保障和改善民生,推动全体人民共同富裕不断取得更为明显的实质性进展。要推进高水平对外开放,稳步扩大制度型开放,推动共建“一带一路”高质量发展,统筹开放和安全,维护国家主权、安全、发展利益。要坚定不移推进全面从严治党,健全全面从严治党体系,坚决打赢反腐败斗争攻坚战持久战,确保党永远不变质不变色不变味,始终成为中国特色社会主义事业的坚强领导核心。
…the best way to commemorate Comrade Deng Xiaoping is to continue advancing the cause of socialism with Chinese characteristics that he initiated. We must closely align ourselves with the central task of comprehensively promoting the building of a strong nation and the great rejuvenation of the Chinese nation through Chinese-style modernization, carrying forward past achievements while striving for progress. We should adhere to the principles of maintaining integrity while innovating, further deepening comprehensive reforms, and continuously providing strong momentum and institutional guarantees for Chinese-style modernization. It is essential to focus on the primary task of high-quality development, fully and accurately implement the new development philosophy, coordinate the promotion of the ‘Five-Sphere Integrated Plan,’ and the ‘Four Comprehensives’ strategy, accelerate the construction of a modern economic system, enhance high-level self-reliance and strength in science and technology, and vigorously develop advanced socialist culture. This will create a favourable environment where material and spiritual civilizations are coordinated, and harmonious coexistence between humans and nature is achieved.
We must uphold the principle of prioritising the people, develop whole-process people’s democracy, build a higher level of rule of law in China, ensure and improve people's livelihoods during development, and achieve more substantial progress towards common prosperity for all people. We should promote high-level opening-up, steadily expand institutional openness, drive high-quality development of the ‘Belt and Road’ initiative, balance openness with security, and safeguard national sovereignty, security, and developmental interests. We must unswervingly advance the comprehensive and strict governance of the Party, improve the system for this governance, and resolutely win the tough and protracted battle against corruption, ensuring that the Party never deteriorates, changes its colour, or loses its flavour, and always remains the strong leadership core for the cause of socialism with Chinese characteristics.
4.3 Xi has appointed a host of new Chinese ambassadors.
Gray Sergeant, Research Fellow on the Indo-Pacific at the Council on Geostrategy, writes from Texas:
On a visit to Taiwan’s offshore island of Kinmen, Lai Ching-te, President of Taiwan, while honouring the soldiers who died during the 1958 Strait Crisis, reaffirmed his country’s unwillingness to be ruled by the CCP. At the same time, Beijing carried out another round of military manoeuvres.
Decision makers on both sides of the strait are not the only ones thinking of these small outlying islands. A new paper explores how Beijing could enhance its grey-zone activities around Kinmen beyond recent Chinese Coast Guard incursions into its restricted waters. They include enforcing a quarantine, imposing a no-fly zone, and sabotaging communications. Such measures, it is envisioned, could result in Beijing taking full control of the islands.
Such a scenario could occur, it is argued, if the US appears distracted and irresolute – or if Xi Jinping’s confidence in the prospect of ‘peaceful reunification’ slips. In doing so, Beijing would hope to severely wound Taiwanese confidence in their own military and in future American support.
None of this seems implausible. Yet this psychological gain is far from guaranteed, and China will obtain little economic or military advantage from taking Kinmen.
Meanwhile, escalation of this nature could carry costs. A link between China and Taiwan would be severed, and given Kinmen’s proximity to Fujian’s coastline, an opportunity to demonstrate the benefits of integration and cross-station exchange would be lost.
Above all else, this low reward option would sound alarm bells around the world. Washington, even if it does little to save Kinmen, may bolster its defence commitment to and its military presence in the rest of Taiwan. Like-minded partners could also step-up support for Taipei.
Of course, this would depend on policy makers having learnt the lessons from Crimea. But if they have, surely this would be the last thing Xi would want to see?
That’s it for this week everyone. If anyone has any comments or thoughts about the PLA’s visit to Moscow, I would love to hear them… Thanks for reading, and please check back in next Tuesday!
- 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.