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.