Russia-PRC golden era in relations
...and Chinese attack drones, Beijing caps finance sector salaries
Hello everyone, and a warm welcome back to the first Observing China under the new Labour government in the United Kingdom (UK). Today marks the launch of the 2024 summit of the North Atlantic Treaty Organisation (NATO), commemorating 75 years since its 1949 founding with the signing of the North Atlantic Treaty. Leaders of the 32 NATO member states, along with their partner countries and the European Union (EU), will convene in Washington until the summit’s conclusion on the 11th July. NATO has recently criticised the People’s Republic of China (PRC) for its substantial economic support of Russia’s illegal full-scale invasion of Ukraine – it remains to be seen how this decisive rhetoric will influence the direction of the summit.
1.1 Sino-Russian relations ‘in best period in history’: Putin tells Xi
On 3rd July, at the Shanghai Cooperation Organisation summit in Kazakhstan, Vladimir Putin, President of Russia, announced that relations between Moscow and Beijing are ‘experiencing the best period in their history.’
1.2 PRC collaborating in manufacture of attack drone for RussiaÂ
European intelligence sources indicate that Russia and the PRC are collaborating in production of a drone similar to Iran’s Shahed, which could be used in Ukraine. The PRC is already supplying Russia with satellite imagery for military use, microelectronics, tank machine tools, and other technologies for weaponry manufacture. This would represent an escalation in Beijing’s support, from non-lethal to potentially lethal aid.
1.3 Nvidia chips smuggled into PRC through underground network
An underground network is smuggling Nvidia’s advanced AI chips into the PRC, circumventing United States (US) export restrictions via couriers in intermediary countries. The black market operation provides a modest flow of the Nvidia chips – vital for AI development – to Chinese AI companies, research institutions and chip resellers.
1.4 Â China intensifies trade battle over EU EV tariffs with brandy and pork probes
As the EU’s implementation of up to 37.6% tariffs on Chinese-made Electric Vehicles (EVs) came into effect on 5th July, the PRC announced a hearing into European brandy imports. This builds upon the PRC’s retaliatory measures in June, where it launched an anti-dumping investigation into imported pork and its by-products imported from the EU. Beijing’s reactions typify a key tactic in the Chinese Communist Party’s (CCP) economic statecraft toolkit – weaponising trade relations to exert political pressure on countries which challenge its interests.
1.5 France expels two Chinese spies attempting forced repatriation
France has expelled two Chinese spies after they attempted to forcibly repatriate a political dissident, a move orchestrated by the Ministry of State Security. Despite efforts by Chinese officials to smooth over the incident, Paris proceeded with the expulsion in a manner designed to avoid offending Beijing.
1.6 Labour’s focus on trade with Beijing may sideline human rights
The Labour Party previously maintained strong positions on the PRC’s human rights issues such as the persecution of the Uyghur minority in Xinjiang, but fears are growing that, now in power, it may prioritise economic engagement with the PRC.
1.7 Beijing plans annual salary limit for finance sector as Part of Common Prosperity InitiativeÂ
The PRC is set to cap the annual salaries of workers in state-backed financial firms at ¥3 million (£323,000) as part of its common prosperity drive. This retroactive measure reflects Xi Jinping’s initiative to ensure even wealth distribution and curb excess amid ongoing economic difficulties.
2.1 On 8th July, the Australian Strategic Policy Institute published a report: ‘Full Tilt: the UK’s defence role in the Pacific’, examining the historical context and future directions for Britain’s defence posture in the Pacific, highlighting the necessity for sustained defence investments and strategic cooperation with Australia.Â
2.2 The Centre for European Reform has published a report about Europe’s engagement with the PRC over climate change, explaining the dual role of cooperation and competition in green energy development.
2.3 Lowy Institute has published an article about the new space race focused on lunar resource extraction, in the wake of the PRC’s Chang’e 6 mission’s successful return to Earth with samples from the Moon’s far side.
3.1 As of Monday 8th July, Keir Starmer, Prime Minister, has held calls with Joe Biden, President of the United States, Volodymyr Zelenskyy, President of Ukraine, Anthony Albanese, Prime Minister of Australia, Fumio Kishida, Prime Minister of Japan, Emmanuel Macron, President of France, and Olaf Scholz, Chancellor of Germany. Xi’s name is so far conspicuously absent from this illustrious call history.Â
3.2 Though the Labour government has made it clear that European security is its priority, David Lammy, Foreign Secretary, has affirmed that the Indo-Pacific region ‘will be fundamental to global prosperity and security in the decades ahead’. Commitments to AUKUS, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP); deepening relationships with regional diplomatic partners Japan, South Korea and India, and engagement with Indo-Pacific nations on issues such as policing, illegal fishing, and cybersecurity will all feature in Labour’s much anticipated ‘China audit.’
4.1 On Sunday 7th July, Chinese Premier Li Qiang extended his congratulations to Starmer for his appointment as the UK’s prime minister. According to Chinese state media, Li told Starmer that:Â
The Chinese government attaches great importance to its relationship with Britain, and stands ready to work with the new British government to consolidate mutual political trust, expand mutually beneficial cooperation, enhance people-to-people and cultural exchanges, support the economic and social development of both countries, and jointly promote world peace, stability, and prosperity.
There’s no Taiwan Take for today, folks. You’ll have to come back on Thursday for your Gray Sergeant fix, and to find out what’s happening in one of the most geopolitically significant islands of the 21st century.
In the meantime, here are a couple of photos from my last Taiwan trip.
If you haven’t visited before, Taiwan has breathtaking natural scenery and some of the friendliest people on earth.
From currently gloomy London, I wish you a productive rest of the day - and check back in on Thursday for more China-related news and views!
- Liddy
If you would like to explore any of the Council on Geostrategy’s PRC-focused research papers, click here to visit the China Observatory.