Fears of an EU-PRC trade war
…an anti-CCP terrorist attack in Pakistan, and British foreign minister to visit PRC
As we predicted in last week’s newsletter, geopolitics in the South China Sea has taken on different dimensions. At the Association of Southeast Asian Nations (ASEAN) summit in Laos on 9th October, the Philippines asked for a ‘code of conduct’ to be established in the contested waters, following military aggression of the People’s Liberation Army (PLA) – the People’s Republic of China’s (PRC) armed forces – in the region.
But the past week’s action isn’t limited to warships roaming in the Indo-Pacific – elsewhere in PRC-related news, brandy and electric vehicles have become the latest weapons.
Let’s have a look in this week’s Observing China.
Following a vote with member states on 4th October, the European Commission will impose tariffs of up to 45% on Chinese-made electric vehicles. Germany, the EU’s largest economy, voted against. But many member states sought to prevent the trade bloc’s electric vehicles from suffering the same fate as its photovoltaics industry. A decade ago, the EU abstained from imposing tariffs on Chinese-made solar panels and now, the PRC has a share of the EU photovoltaic market that towers over 90%.
On 8th October, Beijing announced it will impose temporary anti-dumping measures on brandy imports from the EU. From 11th October, importers of brandy originating in the EU will have to put down security deposits ranging from 30.6% to 39.0% of the import value. France, a top exporter of brandy to the PRC, supported the EU Commission in a vote to impose additional tariffs on Chinese-made electric vehicles which took place on 4th October. As such, Beijing’s decision appears to be retaliatory. Following the announcement, the shares of luxury French brandy producers Hennessy and Remy Martin tumbled.
1.3 Chinese workers killed in Pakistan in protest to Belt and Road Initiative (BRI) development projects
On 6th October, an envoy of Chinese engineers and investors was targeted on its way to Port Qasim electric power plant near Karachi. The Baloch Liberation Army, a separatist terrorist group in Pakistan, claimed the attack which killed two PRC citizens. The power plant is part of the China-Pakistan Economic Corridor, an expansive project aimed at securing and shortening the PRC’s energy import route from the Middle East. A joint venture between the PRC and Pakistan, the Chinese Communist Party (CCP) describes these infrastructure projects as ‘win-win’ initiatives, but despite the billions of dollars spent, local people still face unreliable supplies of water and electricity.
1.4 Philippines condemns PLA Navy attack on Vietnamese fishermen in South China Sea
As predicted in our previous newsletter, tensions in the South China Sea continue to boil. On 29th September, a group of Vietnamese fishermen was attacked near the Paracel Islands, which are claimed by both the PRC and Vietnam. The fishermen were robbed and left with broken limbs. On 4th October, the Philippines joined Vietnam in blaming the PRC for this ‘egregious act’. The PRC has not denied the attack, but instead claims that the Vietnamese fishermen were there illegally. Analysts regard this overt condemnation by the Philippines as an attempt to form a coalition of anti-CCP countries in the contested waters.
1.5 CCP-backed hackers infiltrate networks of US wiretap systems
The latest Beijing-authorised cyber attacks targeted broadband providers in the United States (US) such as Verizon communications, AT&T and Lumen technologies. These companies cooperate with lawful government requests for domestic information linked to criminal and national security investigations. As such, highly sensitive information is at risk. Recent CCP-led cyber attack attempts in the US have focused on national critical infrastructure such as airports. Their aim intends to demonstrate that Beijing could cripple the US if a major conflict between the two nations breaks out.
The 6th October marked the 75th anniversary of diplomatic relations between the PRC and North Korea. In a message exchange, Wang Yi, Foreign Minister of the PRC, said that ‘safeguarding, consolidating, and developing the excellent relationship is a firm and unwavering policy’ of the CCP. The two nations renewed their mutual defence treaty in 2021 and are part of a ‘deadly quartet’ – comprising the PRC, Russia, Iran and North Korea – committed to usurp the open international order.
1.7 PRC ally Kiribati issues rare criticism following Beijing’s missile launch
As we saw recently, the PLA launched an intercontinental ballistic missile into the Pacific Ocean. Beijing claimed that the weapons testing was ‘routine’ – it was the first of its kind in 40 years – and that its neighbours were informed. Kiribati is the latest neighbour to refute Beijing’s claim that they knew of the launch. Taneti Maamau, President of Kiribati, explicitly stated that such test fires are ‘not welcome’ and that they threaten ‘world peace and stability’. Kiribati is one of the Pacific island nations to have recently succumbed to Beijing’s lucrative offers of diplomatic relations (which require dropping ties with Taipei).
2.1 Analysis by the Council of Foreign Relations gives a simplified breakdown of the PRC’s latest engagements with Middle East nations, right up to September 2024. The CCP is stepping up its diplomatic and economic activity in the Middle East as it aims to counter the US’ historically significant position in the region.
2.2 A commentary from the Brookings Institution argues that the US’ utilisation of its partnership with ASEAN as a means to contain the PRC’s influence is not a suitable long-term strategy for its regional interests. The commentary makes the case that the next US president should appeal to the economic needs of individual ASEAN nations, rather than treating the union as a uniform bloc.
2.3 A piece by the Central European Institute of Asian Studies (CEIAS) in Slovakia studies some of the often-cited cases of the PRC’s so-called ‘debt trap diplomacy’. The article argues that the CCP does not overtly display the loan shark behaviour it is often accused of by certain PRC critics, but instead targets developing countries with governments known for corruption and authoritarian tendencies.
3.1 David Lammy, Foreign Secretary, set to visit the PRC
According to a Reuters report from Beijing, David Lammy will visit CCP officials in Beijing and representatives of British businesses in Shanghai in the third week of October 2024. The new foreign minister said that the UK’s relationship with the PRC under a Labour government must be based on ‘the three Cs’ (‘cooperate, compete, and challenge’). Lammy seeks less ‘confrontational’ ties with Beijing, and yet, when he met his Chinese counterpart in July, he reiterated that the UK will staunchly support human rights. Mentions of human rights abuses to the CCP are met with accusations of confrontational behaviour by CCP officials – so Lammy will have some tricky waters to navigate.
3.2 Intelligence chief warns of CCP-led programme to steal data of 20,000 UK citizens
Ken McCallum, Director General of the Security Service (MI5), has said that despite the UK and the PRC’s economic relationship, the latter continues to threaten British security. During an annual update on security threats faced by the UK, McCallum said that the Security Service has foiled over 20,000 attempts by the CCP to steal data from individuals.
3.3 UK return of Chagos Islands to Mauritius a win for the PRC, say politicians
The announcement on 3rd October that His Majesty’s (HM) Government will cede control of the British Indian Ocean Territory (Biot) to Mauritius disquieted several UK and US politicians. They fear that by ceding the archipelago to Mauritius, which has strong links to Beijing, the CCP may use the islands to install listening posts to strengthen its regional intelligence capabilities.
4.1 Xi Jinping vows to continue ‘all-around practical cooperation’ with Russia
On 2nd October, Xi Jinping, General Secretary of the CCP, and Vladimir Putin, President of Russia, had an official phone call to commemorate the 75th anniversary of official ties between the PRC and Russia. According to the statement published on the Chinese Ministry of Foreign Affairs website, during the call, Xi said the following:
习近平强调,我高度重视中俄关系发展,愿同普京总统一道努力,以两国建交75周年为契机,牢牢把握双边关系前进的方向,不断拓展中俄全方位务实合作,共同促进两国高质量发展和现代化建设,为维护世界和平稳定、推动构建人类命运共同体作出新的贡献。
[I place a high value on the development of PRC-Russia ties and together with President Putin, we will take advantage of the 75th anniversary of our countries’ mutual diplomatic recognition to firmly advance our relations. We will ceaselessly promote a multi-faceted, practical cooperation, jointly working towards the modernisation and improved high-quality development of both our countries. We shall do this to uphold global peace and stability and to contribute towards building a shared future for mankind.]
With the PRC’s ongoing support for Russia’s war against Ukraine, this ‘practical cooperation’ between the two authoritarian nations is yet another example of the systemic challenge they pose to the open international order.
4.2 PRC Ministry of Commerce questions EU commitment to green transition in response to EV tariffs
The EU Commission’s announcement on 4th October to impose tariffs on Chinese-made EVs prompted a fierce response by the Ministry of Commerce of the PRC. A Ministry spokesperson has accused the EU of not only hindering the trade bloc’s green transition, but also causing a ‘negative impact on the global climate response’. Deflection is a well-known CCP tactic. In this case, the aim is to transfer the actual focus of the issue (fair trade) to one that it hopes will garner more international attention.
Gray Sergeant, Research Fellow in the Indo-Pacific at the Council on Geostrategy, writes:
10th October is Taiwan’s, or more accurately, the Republic of China’s, National Day. And by the time this ‘take’ reaches you, Lai Ching-te will likely have delivered his presidential address.
At the time of writing (the evening of the 9th) what the president will say is still subject to speculation. The other unknown is how the PRC will react - although a reaction is expected.
Beijing may, some Taiwanese officials believe, use the event as a pretext to scream provocation. One ‘senior Taiwan security official’ recently told Reuters: ‘no matter what Lai says … they might put a name on existing exercises and call it Joint Sword-2024B’. That is a follow-up to May’s, post-inauguration drills, Joint Sword 2024-A.
It is unclear, from this quote, how large or novel this source expects these exercises to be. Will Beijing simply rebrand what have become routine manoeuvres or is an escalation expected? Whatever the case, the message is clear: it does not matter what Taipei does.
But is this true?
Beijing would have to be pretty bad at deterrence if it was unable or unwilling to calibrate s coercion with perceived levels of line crossing. There is some debate around whether Lai’s inauguration language – ‘China’ instead of a more ambiguous term - sparked, or intensified the PRC’s subsequents drills.
At the same time, however, there is nothing Lai can say to placate CCP policymakers, who are no doubt on the lookout for pretexts to practise military drills.
So should the president mind his language? Of course, even if what he says is true. If for no other reason than maintaining Taipei’s reputation as a source of stability in the region, which Lai’s predecessor did well to preserve.
But make no mistake about who will be responsible if drills do take place.
Beijing does not lack agency, communist officials there are not children. Their aggressive actions should not be excused or go unchallenged as if they cannot control themselves.
When they use military tools to intimidate, they choose to do so and they do so to further their expansionist claims. Destabilising drills can never be a reasonable response to the words of a freely-elected leader.
It is therefore welcome that, ahead of Lai’s speech, the US has stated clearly that if these speculated military moves take place they would have ‘no justification’. Over to you, Foreign, Commonwealth and Development Office.
Since the last newsletter, we have seen continued condemnation of the CCP’s military activities in the Indo-Pacific. Is this why Xi seeks a stronger partnership with Russia and North Korea? Then we have the British foreign secretary’s upcoming visit to the PRC. How active will Lammy be in defining UK-PRC relations, when he has avowed to challenge the PRC on its human rights abuses, while not wanting to appear ‘confrontational’ like his predecessors?
We see that there is much more going on between the PRC and the rest of the world than the electric vehicle tariffs and cyber attacks that have steadily occupied a slot in Western media headlines. Stay tuned to Observing China to understand the nuance behind these developments – and to understand them from multiple perspectives.
Grace Theodoulou – Policy Fellow, China Observatory
Email: grace@geostrategy.org.uk
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