U.S.–China Week: Hillary Clinton on China, Obama on China at sea, ‘Great Cannon,’ long arm of Chinese law (2015.04.13)

A special note: From Washington, D.C., this week, this is the ninth and last “beta” edition of U.S.–China Week before a wider launch next week. My sincere thanks go to all who have read these early issues and especially to those who have sent me valuable feedback. Still, your comments or quibbles are very much appreciated. Encourage your friends to subscribe to the list. Follow me on Twitter at @gwbstr. And you can find a copy of this issue at Transpacifica.net.

SOUTH CHINA SEA
Obama joins South China Sea fray as SecDef Carter doubles down on support for allies

President Barack Obama gave a long response to a question about China during a trip to Jamaica. It should be read in full, but this part made news: “Where we get concerned with China is where it is not necessarily abiding by international norms and rules, and is using its size and muscle to force countries into subordinate positions. And that’s the concern we have around maritime issues.” This remark came at a time when U.S. mainstream media and editorial writers have taken renewed interest in the South China Sea. Chinese Foreign Ministry spokesperson Hua Chunying’s one-liner: “Speaking of ‘size and muscle’, I believe everyone knows well who has the largest ‘size and muscle’ in the world.” U.S. Secretary of Defense Ash Carter, in Tokyo, also expressed U.S. concern about the South China Sea.

ANALYSIS: The U.S. government has upped the rhetorical ante regarding Chinese activities in the South China Sea at a time when global media have locked on to China’s rapid island building efforts there. This attention is fueled in no small part by the excellent Asia Maritime Transparency Initiative at CSIS, and it has meshed well with rising alarm about China’s maritime military capabilities. The unresolved question remains: What should the U.S. goal be here, and how can that goal match U.S. abilities and resolve?

COMPUTER ATTACKS
Researchers describe ‘Great Cannon’ website disruption tool alongside ‘Great Firewall’

China’s government has most likely installed a new set of offensive technologies alongside the basically defensive “Great Firewall” system, according to a timelytechnical report by the respected Citizen Lab research group in Toronto. The new system, dubbed “Great Cannon,” was apparently behind the hijacking of foreign web traffic that recently flooded the website GitHub with requests and significantly decreased its performance. (See last week’s brief.) Based on the report, the new capability allows its controllers “to deliver exploits targeting any foreign computer that communicates with any China-based website not fully utilizing HTTPS.” That means almost every connection to a Chinese website we make from abroad.

ANALYSIS: As the report notes, the initial use of this capability seems pretty basic: a classic “denial of service” attack on a website associated with (though not devoted to) spreading “sensitive” information in China. It could likely be configured to deliver surveillance packages or other exploits, however, making the Chinese border a potentially perilous place. Meanwhile, the U.S. government’s objections will continue to be undermined by revelations about its own behavior.

ANTI-CORRUPTION
U.S. ‘agrees to speedier repatriation of Chinese corrupt officials’ as DHS secretary visits China

Secretary of Homeland Security Jeh Johnson met in Beijing with Minister of Public Security Guo Shengkun, producing enthusiastic Chinese coverage, reporting that the United States would streamline procedures for repatriating corrupt Chinese officials (China Daily). The DHS readout, as well as a Xinhua report, emphasized a variety of issues including counterterrorism and container security. Johnson also met with China’s cyberspace chief Lu Wei. DHS made the repatriation agreement sound pretty bland, saying they “agreed to a more streamlined process to repatriate Chinese nationals with final orders of removal, while applications for protection will continue to be handled in accordance with U.S. law and American values.”

ANALYSIS: It’s not clear to me that the DHS statement would significantly speed things up on the U.S. side. To repatriate an accused official (or anyone else), they still require a “final order of removal”—the result of a proceeding that reviews an initial order of removal. The “applications for protection” probably refer to asylum claims, which can come into play even after “final orders.” The real question: How would the U.S. government start deportation efforts against Chinese corruption suspects? Would DHS or IRS or DoJ be instructed to investigate them based on a Chinese list?

CAMPAIGN 2016
Hillary Clinton calls for release of Chinese feminists days before 2016 announcement

Hillary Clinton’s Twitter account sent the below tweet just a few days before she announced for president, linking to this story by Andrew Jacobs. In the last few hours, all five have been released, though it is unclear at time of writing whether they have been released “unconditionally,” as Secretary of State John Kerry also insistedthis week.

ANALYSIS: This begins the Campaign 2016 China watch. How will the candidates address or ignore China? Here, Hillary Clinton and team seem to have found a way to be “hard on China” in a way that recalls Clinton’s 2007 statement that she “stood up” to China at the 1995 UN Conference on Women. As for China, MFA spokesperson Hong Lei said: “The U.S. presidential election is an internal affair of the U.S.” Nonetheless, it has wider implications.

GRAND STRATEGY
CFR report: U.S. should ramp up ‘balancing’ against China, abandon ‘strategic assurance’

Robert Blackwill and Ashley Tellis, in a new Council on Foreign Relations report[pdf], declare that “the likelihood of a long-term strategic rivalry between Beijing and Washington is high” and argue that the United States should adopt a grand strategy toward China that puts U.S. preeminence first. The policies Blackwill and Tellis propose would deliberately isolate China, to the extent possible, in economic, political, and military spheres. They meanwhile imply the Strategic & Economic Dialogue should be discontinued and replaced with intensified high-level diplomacy and a special non-governmental backchannel. The authors are careful to note they do not advocate “containment,” but their recommendations are about as close as you could get, given global economic integration.

ANALYSIS: Neither author is a China specialist (not necessarily a demerit), though they draw on the insights of a distinguished cast from a CFR study group. The report, however, is in stark disagreement with at least several of that group’s members. References to “strategic reassurance,” for instance, are a swipe at group member James Steinberg’s recent book, which advocates for that approach alongside “resolve.” Tellis and Blackwill seem to prefer just “resolve.” Their arguments will be widely read and will reinforce some of the darkest Chinese suspicions.

Posted in Newsletter

U.S.–China Week: New cyber contests, naval nerves, Iran progress, the U.S. TPP plan (2015.04.06)

There is a lot to discuss on cybersecurity this week—so much, in fact, that I won’t be able to do all the news justice. The first two items in this issue, however, cover very significant new developments in the way both the U.S. and Chinese governments are treating the Internet, and the way companies like Baidu and Google are entangled in it all. One way to look at the news is that both governments are seeking greater protection for their domestic online space, and in doing so, they are attempting to project their authority abroad. Unlike, for instance, in Iran negotiations, the two governments show little common ground.

As always: Your comments or quibbles are very much appreciated. Encourage your friends to subscribe to the list. And follow me on Twitter at @gwbstr.

ONLINE CLASHES
Chinese government accused of attacking U.S. site with foreign web traffic, all for domestic censorship

Sparing the technical details, it seems very likely that a large-scale attack designed to disable or bog down the online coding website GitHub was implemented by actors controlled by the Chinese government. The widely suspected but unconfirmed reason for attacking GitHub is that activists had used GitHub to host copies of sites blocked in China, including The New York Times and the anti-censorship group GreatFire. The culprit and motivation are both very difficult to confirm. Meanwhile Google, detecting a very different security problem, stopped trusting China’s encryption certificate authority.

ANALYSIS: The GitHub attack is extremely consequential in that it breaks from previous Chinese actions by hijacking individual browsing activity to disable a very important platform for computer developers worldwide. It also distorted services and code from Baidu, China’s top search engine, to accomplish the attack—hurting the company’s reputation. This kind of attack brings Chinese censorship efforts to everyone’s browser and, and if it continues, the political ramifications will be broad and deep.

CYBER SANCTIONS
Executive order gives White House room to threaten sanctions on hackers

Just as the GitHub attack apparently opens a new frontier in Chinese censorship efforts, a new U.S. executive order puts economic sanctions on the table as a possible measure against “individuals carrying out significant malicious cyber activity,” in onephrasing. The sanctions could also target firms that sponsor commercial espionage and benefit from stolen information. Though an official emphasized that “this executive order is not targeted at any one country or region,” it’s clear that China is on everyone’s mind.

ANALYSIS: For U.S.–China ties, the question is whether sanctions allowed by this order would actually deter the activities emanating from China that, for instance, led to U.S. indictments of accused PLA hackers last year. If sanctions are levied, how would China’s government react? As in U.S. discussions about China’s actions in the South China Sea, this move reflects a desire to “impose costs” on those the U.S. sees as “bad actors.” But imposing cost can also lead to retaliation.

IRAN TALKS
China’s role in Iran nuclear talks unclear, but FM Wang Yi says good for U.S.–China ties

A week ago, Xinhua was one of the many news agencies reporting pessimism about the prospects of reaching a “framework” agreement in the talks between Iran and the P5+1. Once skeptics were surprised, Chinese Foreign Minister Wang Yi called U.S. Secretary of State John Kerry. Wang, who had taken part in the talks, said: “China and the United States, both taking on major responsibilities in safeguarding the international nuclear non-proliferation system, maintained good contact with each other during the negotiations, while instilling positive energy into bilateral relations.” (English via Reuters; Chinese here.)

ANALYSIS: The real Chinese role in the present negotiations is unknown. China, with it’s UN veto, had both enabled and limited the scope of sanctions against Iran, but China and the United States appear to be working together here. There will be fertile ground for historians in the records of U.S.–China and China–Iran communications, should we every get to see them. For now, non-proliferation remains an important common cause in bilateral ties.

MILITARY TIES
U.S. concerns about Chinese naval developments persist

WSJ profiles Adm. Wu Shengli, chief of the PLA Navy and a key figure in U.S.–China military ties. “I would say that he doesn’t want to build a navy that’s equivalent to the U.S.,” Adm. Gary Roughead, a former U.S. Chief of Naval Operations (CNO), said of Wu. “He wants to build a navy that surpasses the U.S.” The current CNO, Adm. Greenert, told a conference audience that planned bilateral naval exchanges for 2015 were “Not a lot. Not as much as I would hope.” Meanwhile the incoming U.S. Pacific Command chief, Adm. Harry Harris, said China is building “a Great Wall” in the South China Sea, according to John Garnaut.

ANALYSIS: Naval ties between the United States and China have historically been as good or better than those of the other military branches. If we see a chill there, this does not bode well for bilateral military ties, which U.S. leaders have seen as a critical confidence-building mechanism to ensure that accidents or political tensions don’t turn into flash-points.

TPP
Russel: TPP ‘most important’ in Asia relations this year, best route to FTAAP

Concluding the Trans-Pacific Partnership (TPP) trade pact “is the most important thing we can do for U.S. relations with Asia this year,” U.S. Assistant Secretary of State Daniel Russel said in Seattle this week. “We also see TPP as the best pathway to a larger Free Trade Area of the Asia-Pacific [FTAAP]. But in the meantime, we’re continuing to move forward with partners outside the TPP. The biggest, of course, is China,” he later added. On China: “[W]e strongly believe that a U.S.-China Bilateral Investment Treaty holds the promise of further opening China’s market to foreign investors and creating an improved investment environment for U.S. companies.”

ANALYSIS: It was already clear that TPP was the administration’s top priority for Asia policy this year. It has also been clear since this year’s State of the Union that an economic “China threat” was on the menu for how to sell it. In reality, Russel is right that first concluding TPP is the most likely path to an APEC-wide free trade area—the current preferred option for China. Watch for U.S.–China BIT progress this September when Xi visits Obama. If it’s not substantial, U.S.–China economic ties are stagnating.

Posted in Newsletter

U.S.–China Week: Lew in Beijing, AIIB aftermath, Volvo’s big move, tech and security (2015.03.30)

This week’s U.S.–China news was dominated by economic developments, not all of them friendly. But it’s worth remembering that top U.S. and Chinese diplomats have been deeply engaged together in the nuclear talks with Iran that face a critical juncture this week. Such is the nature of bilateral ties that a very public clash (over the AIIB) can occur just as both governments also face common challenges (such as nonproliferation).

As always: Your comments or quibbles are very much appreciated. Encourage your friends to subscribe to the list. And follow me on Twitter at @gwbstr.

BANKING & LEW IN BEIJING
U.S. challenges Chinese banking technology rules at WTO and in Beijing

The U.S. government used a WTO mechanism to seek clarification on new Chinese rules that restrict the use of foreign information technology in the banking sector. Reuters reported: “The United States has put pressure on China to explain how the regulations—which aim to promote ‘secure and controllable’ banking technology—comply with global trade rules.” U.S. Treasury Secretary Jack Lew, in Beijing, called on China to “suspend” the rules, FT reported. “It would be a significant barrier to U.S. companies doing business in China if they were to go ahead with the proposals pending,” Lew said. “They want U.S. companies to be here, so they can’t put barriers in the way.”

ANALYSIS: This effort follows earlier U.S. statements on the issue and is apparently designed to produce something like the reported “suspension” of progress on a draft Chinese counterterrorism law that also includes language the U.S. tech industry finds worrisome. The U.S. protests do not, of course, address legitimate Chinese concerns about U.S. surveillance capabilities—a huge problem for U.S. firms.

AIIB & LEW IN BEIJING
U.S. walks fine line on China-backed bank, after allies sign on

“China has an important role to play in the global economic order, and we should be partners in promoting strong, inclusive, and balanced growth.” So said Jack Lew in Beijing, in a subtle reference to the China-backed Asian Infrastructure Investment Bank (AIIB). Xinhua also reports, paraphrasing Lew, that the “United States is looking forward to cooperating with the AIIB, as it welcomes and supports proposals that are helpful to infrastructure construction.” But Bloomberg underlines that the United States still won’t join. Meanwhile, South Korea and Australia are among the U.S. allies that signed on despite a broad U.S. effort to delegitimize the institution.

ANALYSIS: It’s no surprise that the United States won’t join the AIIB. As I wrote last week, Congress would have to approve funding—an almost inconceivable outcome at a time when it won’t even approve modest IMF reforms. It is now obvious that the U.S. opposition campaign was a hugely embarrassing failure, but the reasons behind it are still relevant. Will the AIIB, now with significant buy-in from developed democracies, suffer from weak governance and engage in irresponsible lending, or will it promote “strong, inclusive, and balanced growth” as Lew hopes China will do?

SOUTH CHINA SEA
Kissinger: U.S. and China should ‘remove the urgency’ from South China Sea disputes

Henry Kissinger, at 91 still an influential voice in U.S.–China relations (perhaps especially in China), told reporters the United States and China should follow former Chinese leader Deng Xiaoping’s approach of shelving contentious issues when it comes to the South China Sea (SCS). “Deng Xiaoping dealt with some of his problems by saying not every problem needs to be solved in the existing generation,” Kissinger said. “Let’s perhaps wait for another generation but let’s not make it worse.” Kissinger’s comments came on a visit to Singapore after he visited China and met with President Xi Jinping earlier this month.

ANALYSIS: Kissinger’s suggestion would seem to demand more of China than of the United States, since the U.S. position has at least recently been that all countries should refrain from efforts to change the status quo. China has rejected the U.S. view and continued island construction, this week leading the Philippines to announce a restart of its own efforts. It’s unclear who Kissinger’s advice would serve, since shelving the issue would not stop the change in power dynamics in the region.

CHINESE INVESTORS
Chinese-owned Volvo to open first U.S. plant, spending $500m

WSJ reports: “After years of losing out to Mexico in the race for new automotive assembly plants, the U.S. is about to notch a victory. Volvo Car Corp., owned by a Chinese company, will spend $500 million to build a new vehicle plant in the U.S.” A spokesperson said “the new plant will also reduce shipping costs and insulate Volvo from currency fluctuations.” The company will announce the host state in about a month. Here’s an un-paywalled story from The Detroit News.

ANALYSIS: As Chinese companies develop and acquire global brands, as Geely did when it bought Volvo in 2010, we will see more and more large-scale Chinese investments in the United States that come with benefits for local economies and new jobs. This is an example of how the United States can be an attractive destination for investment, whether acquisitions like Smithfield or plants like this one. Ties like this, some hope, can make U.S.–China common interests more concrete for Americans, even as the two governments face challenging differences.

STRATEGY
Computer, naval, and other military tech plays key role in Asian security

A new report from the Center for a New American Security underlines the importance of technology in security challenges in East Asia, not just for China and the United States. Rather than take up just cybersecurity, or the role of aircraft carriers, or the effects of a specific military platform, the authors emphasize that all new technologies for regional actors mean new capabilities and vulnerabilities and produce the potential that “states may be willing to take riskier military actions with new technologies” and the risk of “inadvertent escalation from miscalculation about an opponent’s capability…or resolve.”

ANALYSIS: The authors make an important contribution by offering an integrated look at the role of technology. Their recommendations, however, deserve careful examination and debate. They write: “to address security dilemma concerns, we emphasize transferring and developing localized A2/AD capabilities, because they are most useful for defending against power projection, not for offensive actions.” Of course, in the South China Sea, one country’s defense is another country’s incursion.

Posted in Newsletter

U.S.–China Week: AIIB, missile defense, SCS, Wang Qishan (2015.03.23)

U.S.–China Week returns today after week off, and there was no shortage of news while I was away, so let’s get to it.

As always: Your comments or quibbles are very much appreciated. Encourage your friends to subscribe to the list. And follow me on Twitter at @gwbstr.

AIIB
U.S. attempt to undermine China-backed infrastructure bank crumbles spectacularly

First off, CFR has the best simple explanation of what’s going on. A recap: An unnamed U.S. official called out the UK government for “constant accommodation” of China after it decided to join the China-backed Asian Infrastructure Investment Bank (AIIB), despite strong U.S. advocacy against advanced economies joining up. Germany, France, and Italy soon followed; and Australia and Japan may be next. A Xinhua writer took to mocking a “petulant and cynical” Washington. Xinhua runs plenty of mockery, but former U.S. official and World Bank President Robert Zoellick seemed to partially agree, calling the Obama administration approach“mistaken both on policy and on execution.”

ANALYSIS: Expert consensus has been unusually strong that the U.S. effort to prevent G7 economies from joining AIIB was wrongheaded. It is intuitively clear that the United States couldn’t join, since Congress would have to allocate funds, but the Obama administration chose to exert real pressure on others to follow suit. In reality, this is an example of a strategically unwise instinct in Washington to oppose every aspect of Chinese influence, expending resources and diplomatic capital on losing battles or potentially minor issues. U.S. government objections reportedly boiled down to fears of low environmental or corruption standards if China writes the rules, a justification that has been unconvincing domestically and abroad.

NORTH KOREA
China opposes U.S. anti-missile technnology in South Korea

A possible plan by the U.S. and South Korean governments to deploy an advanced missile defense capability in South Korea has produced opposition from China andconsiderable friction between the East Asian neighbors. NYT reports: “Although Washington has insisted that such a deployment would be aimed solely at dealing with threats from North Korea, China worries that the system would help the United States military extend its radar sensor capabilities deeper into its territory and compromise its own strategic deterrent.” U.S. Assistant Secretary of State Danny Russel chose to poke fun at China’s objection: “I find it curious that a third country would presume to make strong representations about a security system that has not been put in place and that is still a matter of theory.”

ANALYSIS: This represents an apparent break from the past, in which China’s government broadly accepted the U.S. claim that its missile defenses in the region were targeted at North Korean capabilities. China’s own nuclear deterrent was not affected, so nuclear strategists did not see cause for alarm. It seems unlikely that one new deployment would change that equation, but resistance to U.S. monitoring is strong, as we have seen in the ongoing dispute over what Chinese representatives call “close-in surveillance” in the South China Sea.

SOUTH CHINA SEA
Admiral: U.S. Navy would support a joint ASEAN maritime patrol

“During a meeting this week with naval leaders from Association of South East Asian Nations (ASEAN) U.S. 7th Fleet commander Vice Adm. Robert Thomas said the U.S. would back a combined ASEAN maritime patrol in the hotly contested region. …’If Asean members were to take the lead in organizing something along those lines, trust me, the U.S. 7th Fleet would be ready to support.'” [source] Chinese reaction was predictably negative, just as it was in January, when the same admiral welcomed Japanese air patrols in the area.

ANALYSIS: This comment, which was better hedged than media headlines would have us believe, comes at a time when the U.S. security and political community are increasingly engaged in the South China Sea issue. The chairs and ranking members of the Senate Armed Services and Foreign Affairs committees sent a letter to Defense Secretary Ash Carter and Secretary of State John Kerry pushing for a “comprehensive strategy for addressing the PRC’s broader policy and conduct” in the area. The U.S. position that it does not take sides is increasingly untenable, not least because the Chinese government declined to freeze land reclamation, putting the governments explicitly at odds.

CORRUPTION
Report: Anti-graft chief Wang Qishan to visit U.S., chase Chinese fugitives

“The people familiar with Mr Wang’s trip said preparations had not yet been finalised. It would be his first overseas visit in his capacity as [CCP Central Commission for Discipline Inspection] chief, according to a chronology of leadership trips compiled by the official Xinhua news agency,” FT reports. “Mr Wang no longer has a government title, raising awkward protocol questions about which US government official would formally host him.”

ANALYSIS: The Chinese government has firmly asked for U.S. assistance in tracking down and turning over people, especially officials, it claims have fled to the United States with illegally obtained wealth. These requests are a challenge for the U.S. government, which must balance due process and human rights concerns against substantial evidence of criminality. It may be an opportunity for leverage as well: The U.S. government seeks enforcement of its cyber theft laws in China, and China wants enforcement of its own laws in the United States. Such cooperation could even be linked to issues like the possible delay of a Chinese law that U.S. tech firms fear would hurt business.

SOCIAL TRENDS
Interest in Chinese language, study abroad, and jobs down among U.S. students

Reuters reports on several indications that U.S. students are less drawn to China for study abroad, language study, or work after graduation: “The Institute of International Education says the number of U.S. students studying in China fell 3.2 percent in 2012-13 to 14,413, even as overall study abroad numbers rose modestly. … As multinationals in China hire mostly local Chinese, a growing percentage of whom have studied abroad, they have less need for foreigners who speak Chinese.”

ANALYSIS: A true decline in interest in China, while the domestic commentary on China bends toward caricature, would be extremely worrisome. But comparisons in the statistics to 2007, the year before the Beijing Olympics, probably capture an unusual spike in interest—and the cohort who started Chinese in high school at that time are finishing college now. The United States needs more people with serious China experience, but the barriers to getting that experience have, in my unscientific impression, risen. This also means the young U.S. expats in China are generally better prepared than earlier groups, not an altogether bad outcome.

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief covering the most important news developments and their implications in U.S.–China relations and highlighting especially insightful or influential new policy analysis. It is produced by me, Graham Webster, a senior fellow for U.S.–China relations at Yale Law School’s China Center. Opinions expressed here are my own (and I reserve the right to change my mind). Subscription to U.S.–China Week is free and open to all, and an archive of past editions appears at my long-running website on U.S.–East Asia politics, Transpacifica.

Follow me on Twitter at @gwbstr.
Send feedback and tips to mail@gwbstr.com.

Posted in Newsletter

U.S.–China Week: ‘Two Meetings’ and U.S.–China relations (2015.03.09)

U.S. “China watchers” have spent the week glued to China’s key annual political gathering, the Two Meetings (两会) of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Congress (CPPCC). These meetings always offer the opportunity to speculate about Chinese policy intentions, and I offer some preliminary thoughts in the first two items below. (Your thoughts and criticisms are very welcome, as I have not had time to read these documents deeply.) These same “China watchers” have (less usefully) probably spent even more energy discussing a recent essay by David Shambaugh of George Washington University, declaring that Communist Party rule is in its closing act. My only comment on this is that the CCP could fall in several ways and on several timelines, or it could persist and succeed in many different ways. Governments, companies, and people concerned should not bet everything on one outcome or the other.

This is the fifth “beta” edition of the newsletter. Share it widely and get your friends to sign up! I’ll be on vacation and offline next week, so see you March 23.

Li Keqiang’s report: ‘New type of international relations’ and a bigger role for China

Premier Li Keqiang’s annual report to the National People’s Congress is only in small part a foreign policy document. But this year’s report, released last week at China’s annual “Two Meetings” in Beijing, has a few adjustments since last year that are worthy of attention. The report includes the phrase “new type of international relations based on mutual benefit and cooperation” (以合作共赢为核心的新型国际关系), which is new here but described by Xi Jinping in Moscow two years ago. The phrase shares structure with the “new type of major country relations” slogan, but more important is Xi’s association of the idea with “democratic principles concerning world affairs” (国际事务的民主原则) and transcending the Cold War mentality.

COMMENT: This “new type of international relations” went unmentioned in Li’s report last year, and so this could be a signal that the concept has been elevated. The implications of “democratic principles” for the international system are debatable, but it is hard to avoid the conclusion that a stronger deciding and rule-making role for China (and perhaps the other BRICS countries) would be called for. Watch for considerable ambiguity on the Chinese side and growing discomfort on the U.S. side regarding changes to the international system.

Li Keqiang’s report: U.S. investment treaty comes after China’s favored FTAs

Both this year and last year, the United States is mentioned by name only once in Li’s report, specifically reiterating China’s intention to “continue negotiations on investment agreements with the United States and the European Union.” Compared with last year’s report, this remark comes last in a longer laundry list of ways Li says the government intends to “promote multilateral, bilateral, and regional opening up and cooperation.” Of specific interest is the introduction of the Regional Comprehensive Economic Partnership (RCEP), which some people see as a competitor to the U.S.-backed Trans-Pacific Partnership (TPP), and the Free Trade Area of the Asia Pacific (FTAAP), which would include the United States but about which the U.S. position is muddled.

COMMENT: U.S.–China bilateral investment treaty (BIT) negotiations are ongoing (see below), but this passage suggests that the Chinese side is putting less political emphasis on the BIT than on its other initiatives. That’s only fair. The U.S. side is explicitly playing a kind of “China threat” card in selling the TPP domestically, while staying mostly quiet about the BIT. (See last week’s newsletter.)

Obama elevates U.S. opposition to proposed Chinese tech rules to presidential level

China’s proposed rules “would essentially force all foreign companies, including U.S. companies, to turn over to the Chinese government mechanisms where they can snoop and keep track of all the users of those services,” Obama said in an interview with Reuters. “As you might imagine, tech companies are not going to be willing to do that.” … “We have made it very clear to them that this is something they are going to have to change if they are to do business with the United States.” Chinese Foreign Ministry Spokeswoman Hua Chunying responded: “The formulation of the counterterrorism law is China’s internal affair. We hope the United States can calmly and objectively handle it.” Original draft law in Chinese. Crowdsourced translationfrom my colleague Jeremy Daum’s China Law Translate.

COMMENT: This can be seen as another example of the U.S. government’s willingness to speak loudly on China technology issues, and, at least rhetorically, reach for a big stick (“if they are to do business with the United States”). But what is the credible U.S. threat here? Meanwhile it’s possible the U.S. alarm is based on a “worst case” reading of ambiguities in the proposed law.

Optimism from China on bilateral investment, but a firm stand against U.S. WTO complaints

Li Keqiang announced at the NPC Thursday that China “plans to halve the number of industries in which it restricts foreign investment.” Specifically “steel, ethylene, oil refining and white spirits” were cited as likely areas of opening. This move is a logical next step given the declared intentions for the Shanghai Free Trade Zone and the establishment of several new zones. (China also has a draft foreign investment law circulating.) Chinese Commerce Minister Gao Hucheng meanwhile declared “groundless” last month’s U.S. complaint that China is subsidizing exports in contravention of WTO rules.

COMMENT: The news about investment restrictions being lessened should be a strong signal of China’s continued intentions to conclude an investment treaty with the United States. The real negotiations in that process are over the “negative list,” i.e. the list of industries where investment will not be fully open. China’s list has been extensive, and this announcement suggests the government intends to make domestic reforms that will better enable realistic negotiations.

Chinese restrictions on civil society, local and foreign, a continued challenge in bilateral ties

It’s an open secret that many of the foreigners who work in Beijing—whether in business, freelance journalism, NGOs, or otherwise—do so on visas that don’t perfectly match their situation. The Wall Street Journal reports on the ejection, on seemingly lawful visa grounds, of a UK citizen and a French citizen working for civil society groups. The fact is, for many, procedures make obtaining the proper visa impossible or impractical. Employers, including state-affiliated entities, have often suggested foreigners just enter on whatever visa they can get. Meanwhile authoritiesdetained several women’s rights advocates, apparently related to a planned demonstration to coincide with International Women’s Day (and during the sensitive Two Meetings period).

COMMENT: Visa issues for people working in politically sensitive areas, and the detention of activists planning a public demonstration, are nothing new in China. I include them here, however, because the constant drumbeat of “crackdown” news has a strong effect on views in Washington. The cliche is that state restrictions on society are a double-edged sword. Disruption is temporarily avoided, but repression can increase opposition. In this case, there is a third edge, fraying the fibers of the loose network in the United States that supports strong ties with China.

Posted in Newsletter

About

Since 2006, Transpacifica has been a blog, and collection of resources on East Asian politics and international relations in the Asia-Pacific, with a special focus on China, Japan, and the United States. Transpacifica is edited and primarily written by Graham Webster, Research Scholar and Senior Fellow for U.S.–China Relations, Yale Law School China Center. Get in touch, or follow Graham on Twitter.

Archives