U.S.–China Week: The Micron bid, Rubio’s China stand, SCS shifts, an Abe opening? (Issue 14, 2015.07.20)

Welcome to Issue 14 of U.S.–China Week. As always: Please encourage interested friends and colleagues to subscribe to the list. Here is a the web version of this issue. And please send your comments, quibbles, and suggestions to [email protected].

OPEN MARKETS?
Chinese bid for U.S. microchip company could test openness of U.S. market

A bid by Tsinghua Unigroup, according to Bloomberg the investment arm of the elite Tsinghua University, to acquire the U.S. microchip company Micron Technology for $23 billion raised a wide variety of questions. The price was seen as unrealistically low. Said one analyst: “We think the price was only floated through the media because they were too embarrassed to bring it to Micron’s board.” If a deal is reached, it would almost certainly be reviewed for national security implications by interagency Committee on Foreign Investment in the United States (CFIUS).

ANALYSIS: While it is not yet clear whether Unigroup’s takeover bid is serious, this is one more story to watch as the U.S. and Chinese governments negotiate a bilateral investment treaty. National security reviews were already an area of concern for China, but China’s new National Security Law means the concerns are mutual. One report suggested Unigroup may not have hired a bank or law firm to manage the bid, steps that can drastically increase chances of CFIUS approval. One of the reasons this is the case is that CFIUS need not give a simple yes or no answer. It can also reach an understanding with an acquiring firm to spin off certain areas of business that are deemed sensitive, or to undertake other “mitigation” efforts, while allowing the broader deal to go forward.

SOUTH CHINA SEA
U.S. Pacific Fleet commander rides along in spy plane; Chinese MFA denies validity of Philippine arbitration

Admiral Scott Swift, the new commander of the U.S. Pacific Fleet, traveled on a P-8 surveillance plane over the South China Sea, in what he called a “routine” patrol. / Commenting on the Philippine arbitration case in progress in The Hague, a Chinese Foreign Ministry spokesperson said, “On the issue of territorial sovereignty and maritime rights, China will never accept any imposed plan, nor any solution arrived at by unilaterally resorting to a third party for resolving disputes.” / Meanwhile, former Pacific Command chief Dennis Blair and former Ambassador to China Jon Huntsman offered their own vision for the South China Sea, saying “[r]ecent American statements have been more definitive about U.S. interests, but have not amounted to a strategy.” They advocate for an agreement among the non-China claimants, and then say the “United States should not turn immediately to military power such as military shows of force and freedom of navigation exercises.”

ANALYSIS: Blair and Huntsman described well a recent shift in U.S. policy toward the South China Sea when they noted that officials have more clearly described U.S. interests in the region, but that U.S. actions do not immediately appear tuned to pursuing those interests. Key strategists and former officials are now essentially arguing for a shift away from the international law–based approach embodied in the Philippine arbitration and toward direct advocacy for a regional grand bargain. The trouble is that the several countries involved in such a bargain could have trouble coming together, and Chinese interference would be expected.

THE ABE FACTOR
Japan’s Abe may meet Xi, as top adviser travels to Beijing during defense legislation fight

While Japanese Prime Minister Shinzo Abe’s ruling coalition set out to advancecontroversial defense legislation in the Diet, Abe’s national security adviser Shotaro Yachi, who heads Japan’s new National Security Secretariat, traveled to Beijing. There, he met for five hours with State Councilor Yang Jiechi, who reportedly said China “is preparing for high-level political dialogue between the two countries,” leading to speculation that Abe and President Xi Jinping may hold a summit this year. Yachi also met Premier Li Keqiang. / Meanwhile, reports emerged that a forthcoming Japanese defense paper will include new rhetoric criticizing China for its South China Sea island building, and Japan’s top military commander said in Washington the question of Japan conducting patrols in the South China Sea was a “potential future issue to be considered.”

ANALYSIS: Sino-Japanese relations will be on a razor’s edge in the coming weeks as China’s military parade celebrating its victory in World War II approaches in early September and Abe plans a statement on the 70th anniversary of the end of the war. Abe can send one positive signal simply by refraining from visiting the Yasukuni Shrine. Japanese and U.S. skepticism of Chinese intentions, and U.S. efforts to bring Japan more fully into the regional security architecture, will not be quashed even by high-protocol meetings between leaders and deputies.

CAMPAIGN 2016
Rubio, co-chair of China commission, denounces Chinese rights practices and opposes nuclear cooperation

Sen. Marco Rubio (R-Fla.), as co-chair of the Congressional-Executive Commission on China (CECC), published a statement declaring that a recent “wave of repression [in China] constitutes an undeniable setback in U.S.–China relations” and asked whether Xi deserves “a red carpet welcome in Washington” in September. Rubio is also co-leading a charge to block the renewal of the U.S.–China Nuclear Cooperation Agreement, which permits some U.S. nuclear exports to China. The Congressional Research Service has a recent paper on the agreement.

ANALYSIS: The CECC is known for being highly critical of China’s government, especially on human rights issues, so Rubio is a natural figure to lay down markers for what “hard on China” will look like in the 2016 campaign season. He will not, however, be the only U.S. political figure to speak out against Xi’s September state visit. If the nuclear agreement expires, as it is scheduled to do at the end of 2015, U.S. nuclear machinery companies could lose out on the rapid expansion of China’s nuclear power sector.

WHAT THEY REALLY THINK
U.S. views of China mixed: youth more positive; majority favor military force to defend allies from China

A Pew Research presentation based on an international survey in May paints a complex picture of global views on China and the United States. The percentage of global respondents who viewed the United States as the world’s top economic power rose slightly to 51 from 44 last year, with China falling 2 percent to 26. Globally, younger people are more likely to hold positive views of China, with the gap widest in the United States, where 55 percent of respondents aged 18–29 had a favorable view of China, compared to only 27 percent for those over 50. Fifty-six percent of U.S. respondents said the United States should use military force to defend Japan, South Korea, or the Philippines in a “serious military conflict with China.” Only 34 percent said no. Meanwhile an unscientific poll of participants at a Washington conference suggests the Beltway crowd expects competition (79 percent) rather than armed conflict or greater cooperation with China, and more believe Chinese hegemony in East Asia is contingent on U.S. policy (61 percent) and not a fait accompli (25 percent).

ANALYSIS: Much of the time, there is a perceptible “mood” among China policy specialists in the United States, one that has swung sharply downward in recent months. I wonder what we could learn from a well-designed longitudinal study of expert views on China. For one thing, it would be possible to check how far from the mainstream certain especially hostile or sanguine views actually fall.

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of The China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. A full bio is available here.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

Subscription to U.S.–China Week by clicking here or e-mailing me 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.

Contact: Follow me on Twitter at @gwbstr. Send e-mail to [email protected].

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