China, Pakistan agree to enhance high-level exchanges in view of current global situation: Spokesperson

BEIJING: China and Pakistan have agreed to enhance high-level exchanges and strengthen pragmatic cooperation for more progress in the bilateral relations in wake of the changing international situation, a spokesperson of Chinese foreign ministry Thursday said.

“The two sides also agreed to jointly implement the consensus reached by our two leaders during Prime Minister Imran Khan’s attendance in the second Belt and Road Forum for the International Cooperation,” Lu Knag said while responding to a question asked by APP regarding a meeting between Foreign Minister Shah Mahmood Qureshi and Chinese Foreign Minister Wang Yi on the sidelines of Shanghai Cooperation Organization (SCO) Council of Foreign Ministers Meeting held in Bishkek.

He informed that the State Councilor and Foreign Minister Wang Yi met with Foreign Minister Shah Mahmood Qureshi who is a good friend on the sidelines of their SCO foreign ministers meeting held the other day.

“Both sides believe that the all-weather strategic cooperative partnership is deepened in our Belt and Road Initiative (BRI) cooperation” he added.

Lu Kang said both the sides agreed to jointly implement the consensus reached by the two leaders during Prime Minister Imran Khan’s attendance in the second Belt and Road Forum held during the last month.

He said faced with the current international situation, the two countries agreed to enhance high-level exchanges and deepen our practical cooperation for more progress in their bilateral relations.

The spokesperson said the two foreign ministers also discussed some international cooperation on some important issues for example the counter-terrorism.

“Both sides agreed to deepen our cooperation on bilateral and multilateral occasions,” he added.

He said both sides also discussed some other issues including the Afghan situation, the solution to this issue and reached many important consensuses in other areas.

Meanwhile, according to a Chinese foreign ministry’s statement issued here, Wang Yi during the meeting told his Pakistani counterpart that China-Pakistan all-weather strategic partnership had been deepened and promoted in the process of building the “Belt and Road”.

The two sides should jointly implement the consensus reached by the leaders of the two countries during Prime Minister Imran Khan’s visit to China for participation in the second Belt and Road International Cooperation Summit, strengthen high-level exchanges, deepen pragmatic cooperation, and promote China-Pakistan relations.

Wang Yi said the Chinese side appreciated Pakistan’s long-term efforts to combat terrorism. “It hopes and believes in that the Pakistani side will strengthen security work for Chinese personnel and institutions in Pakistan and safeguard the security of China-Pakistan cooperation.”

Shah Mahmood Qureshi said Pakistan was willing to work with China to prepare for the next stage of high-level exchanges between the two countries, implement the results of the second “Belt and Road” international cooperation summit forum, strengthen the cooperation between the two countries and promote new achievements in bilateral relations.

The Pakistani side was fully consistent with the Chinese goal in combating terrorism and extremism. Both sides shared the same feelings and the same fate. The concern of the Chinese side was the concern of the Pakistani side.

The Pakistani side would do its utmost to protect the security of Chinese citizens and institutions in Pakistan, and continue to strengthen bilateral anti-terrorism cooperation under the dual multilateral framework and safeguard the common interests of the two countries and regional peace and stability.

The two sides also exchanged views on the Afghan issue and agreed to strengthen communication and coordination, jointly promote the early political settlement of the Afghan issue, and maintain regional peace and stability.

Date: 24/5/2019

Source: The News

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China fires back at US with tariff hike on goods worth $60bn

BEIJING: China said on Monday it will raise tariffs on $60 billion worth of US goods from June 1, in retaliation for the latest round of US tariff hikes and Washington’s plans to target almost all Chinese imports.

The announcement came after the latest round of US-China trade negotiations ended on Friday without a deal, and after Washington increased tariffs on $200 billion worth of Chinese products.

US President Donald Trump had also ordered the start of a process to impose new duties on another $300bn worth of Chinese items.

China’s rates will target a number of American imports with tariffs rising up to as high as 25pc, according to a statement by the Tariff Policy Commission of the State Council — China’s cabinet.

“China’s adjustment of tariff-adding measures is a response to US unilateralism and trade protectionism,” the statement said, adding that it hoped the US would work with China towards a “win-win agreement”.

Despite the retaliation, Beijing appeared to give time to find a resolution by setting the June 1 date.

The announcement sent Wall Street stocks plunging Monday, with losses on the tech-rich Nasdaq exceeding three percent, the Dow Jones Industrial Average sliding 2.3pc, and the broad-based S&P 500 tumbling 2.4pc.

Most observers have warned a trade war between the world’s two largest economies could shatter global economic growth, and hurt demand for commodities like oil.

The Chinese response was announced soon after Trump warned Beijing not to retaliate.

“China should not retaliate-will only get worse!” the US president wrote in a series of tweets on trade.

But Beijing appeared to dig in.

“China will never surrender to external pressure,” foreign ministry spokesman Geng Shuang said at a regular briefing on Monday.

In addition to tariff hikes, China could also use other measures to hit back at the United States, as it imports fewer US products — which limits its ability to match tariffs dollar-for-dollar.

“China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China,” Hu Xijin, editor of China’s state-run Global Times, wrote on his verified Twitter account.

“Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically.” Beijing is the biggest holder of US debt, and Bloomberg News estimated last year that the Chinese state held around $1.2tr’s worth.

“As for the trade war launched by the US side, China has long expressed that it is unwilling to fight, but it is not afraid to fight, and it has to fight when necessary,” China’s main broadcaster, the state-run CCTV, added.

Date: 14/5/2019

Source: Dawn

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U.S. Pushes China on Promises After ‘In-Depth’ Trade Meetings

Source: Bloomberg

Date: 9th January 2019

The Trump administration is pushing for a way to make sure China delivers on its commitments in any deal the two nations reach to defuse a trade war that has roiled financial markets and dimmed the outlook for global growth.

The U.S. wrapped up three days of mid-level talks with China in Beijing on Wednesday, noting a commitment by President Xi Jinping’s government to buy more U.S. agricultural goods, energy and manufactured products. For its part, China said the meetings were “extensive, in-depth and detailed,” and laid the foundation for a resolution of the conflict.

The office of U.S. Trade Representative Robert Lighthizer said it wants any deal to include “ongoing verification and effective enforcement” and the U.S. will decide on next steps after officials report back to Washington.

 China’s Ministry of Commerce on Thursday said the two sides “implemented the consensus” reached by the two presidents in earlier talks, and discussed both trade and structural issues in the meetings.

Investors welcomed signs of optimism from the talks. Stocks rose globally after the two economic powers appeared to inch closer to an agreement, with the S&P 500 Index rising for a fourth day to the highest in almost a month.

The U.S. push for enforceable targets in a deal underscores the challenge of reaching a lasting truce. President Donald Trump and his deputies have criticized China for failing to live up to past promises, including a pledge to promptly open up the Asian nation’s economy to more trade and investment after it joined the World Trade Organization in 2001.

Trump and Xi have given their officials until March 1 to reach an accord on “structural changes” to China’s economy on issues such as the forced transfer of American technology, intellectual-property rights, and non-tariff barriers. It’s a tight window in which to nail down deep changes to China’s economic model, some of which past U.S. administrations advocated for years and U.S. lawmakers on both sides of the aisle support.

A group representing American companies doing business in China welcomed the “substantive discussions,” but stressed the need to work out key details. “Progress should include a mechanism for the removal of tariffs and measurable, commercially meaningful outcomes,” the U.S.-China Business Council said in a statement. The U.S. and China have slapped a tariffs on a combined $360 billion in each other’s imports since July.

The USTR statement didn’t say whether progress had been achieved on its main concerns.

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China rejects NYT report about building military equipment under CPEC

Source: The News

Date: 21 December 2018

BEIJING: The Chinese foreign ministry Friday rejected a media report that it was planning to build military equipment including fighter jets under China-Pakistan Economic Corridor (CPEC) framework.

“According to our information, the relevant report is not true,” Chinese foreign ministry’s spokesperson Hua Chunying said during her regular briefing held here.

She remarked that the CPEC was an important framework for cooperation bearing long-term interests for both sides.

The New York Times reported Thursday in a long dispatch claiming that Beijing’s “Belt and Road” plan was taking a “military turn” as Pakistani Air Force and Chinese officials are putting the final touches on a plan to expand Pakistan’s building of Chinese fighter jets, weaponry and other hardware.

The dispatch said that the newspaper had “reviewed” the confidential plan which it says also envisages the cooperation between China and Pakistan in space.

“All those military projects were designated as part of China’s Belt and Road Initiative, a $1 trillion chain of infrastructure development programmes stretching across some 70 countries, built and financed by Beijing,” NYT’s correspondent Maria Abi-Habib wrote from Islamabad.

– Joint Coordination Committee meeting –

Referring to the meeting of Joint Coordination Committee (JCC) on CPEC held on December 20 in Beijing, the FO spokesperson observed that the two sides would continue to implement the consensus reached between the leadership of the two countries to cement the early harvest projects and to extend the CPEC to industrial parks and social livelihood.

To a question regarding reports of withdrawal of the US troops from Afghanistan and Syria, she said that China’s position on these two issues was consistent.

Hua Chunying said that as the close neighbour of Afghanistan, China stood for the Afghan-led and Afghan-owned inclusive reconciliation process.

“We are willing to make concerted efforts to achieve long-term peace and stability in Afghanistan helping the Afghan people to enjoy peace and stability at an early date.

To another question about Syrian issue, she said that the Chinese side always believed that sovereignty, independence and territorial integrity of Syria should be respected and the future of Syria should be determined by its own people.

The spokesperson said that China would like to work with the international community and continue to play a positive and constructive role in the early settlement of Syrian issue.

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China built a tower that acts like ‘the world’s biggest air purifier,’ and it actually works

Source: Business Insider
Date: December 21, 2018
  • Scientists say an experimental tower in northern China, dubbed the world’s biggest air purifier, appears to be working.

  • Researchers at the Institute of Earth Environment at the Chinese Academy of Sciences say they have seen improvements in the air quality over an area of more than three square miles in the past few months.

  • The tower works through greenhouse coverings. Polluted air is sucked in, heated up by solar energy, and then circulated through multiple layers of cleaning filters.

  • A number of locals say they have noticed a difference in the air quality, even during the winter when the city is especially prone to pollution.

    An experimental tower over 100 meters (328 feet) high in northern China — dubbed the world’s biggest air purifier by its operators – has brought a noticeable improvement in air quality, according to the scientist leading the project, as authorities seek ways to tackle the nation’s chronic smog problem.

    The tower has been built in Xian in Shaanxi province and is undergoing testing by researchers at the Institute of Earth Environment at the Chinese Academy of Sciences.

    The head of the research, Cao Junji, said improvements in air quality had been observed over an area of 10 square kilometers (3.86 square miles) in the city over the past few months and the tower has managed to produce more than 10 million cubic meters (353 million cubic feet) of clean air a day since its launch. Cao added that on severely polluted days the tower was able to reduce smog close to moderate levels.

    The system works through greenhouses covering about half the size of a soccer field around the base of the tower.

    Polluted air is sucked into the glasshouses and heated up by solar energy. The hot air then rises through the tower and passes through multiple layers of cleaning filters.

    “The tower has no peer in terms of size … the results are quite encouraging,” said Cao.

    Xian can experience heavy pollution in winter, with much of the city’s heating relying on coal.

    xian china air pollution
    The world’s biggest air purifier is being tested in Xian in an effort to remedy the nation’s smog problem without costing a fortune.
     Zhang Yuan/China News Service/VCG via Getty Images

    The tower’s operators say, however, that the system still works in the cold months as coatings on the greenhouses enable the glass to absorb solar radiation at a much higher efficiency.

    Cao’s team set up more than a dozen pollution monitoring stations in the area to test the tower’s impact.

    The average reduction in PM2.5 – the fine particles in smog deemed most harmful to health – fell 15 percent during heavy pollution.

    Cao said the results were preliminary because the experiment is still ongoing. The team plans to release more detailed data in March with a full scientific assessment of the facility’s overall performance.

    The Xian smog tower project was launched by the academy in 2015 and construction was completed last year at a development zone in the Chang’an district. The purpose of the project was to find an effective, low-cost method to artificially remove pollutants from the atmosphere. The cost of the project was not disclosed.

    air purifier tower china
    The tower’s operators say, however, that the system still works in the cold months as coatings on the greenhouses enable the glass to absorb solar radiation at a much higher efficiency.
     VCG/VCG via Getty Images

    What was previously thought to be the largest smog tower in China was built last year by Dutch artist Daan Roosegaarde at 798, a creative park in Beijing.

    The seven-meter (23-feet) tall tower produced about eight cubic meters (282.5 cubic feet) of clean air per second. It was entirely powered by electricity, most of which is generated by coal-fired power plants in China.

    Daan Roosegaarde smog tower .JPG
    Dutch artist and innovator Daan Roosegaarde poses in front of the Smog Free Tower.
    Damir Sagol/Reuters

    Cao, however, said their tower in Xian required little power to run.

    “It barely requires any power input throughout daylight hours. The idea has worked very well in the test run,” he said.

    Several people in Xian told the South China Morning Post they had noticed the difference since the tower started operating.

    A manager at a restaurant about 1km (0.62 miles) northwest of the facility said she had noticed an improvement in air quality this winter, although she was previously unaware of the purpose of the tower. “I do feel better,” she said.

    A student studying environmental science at Shaanxi Normal University, also a few hundred meters from the tower, said the improvement was quite noticeable.

    “I can’t help looking at the tower each time I pass. It’s very tall, very eye-catching, but it’s also very quiet. I can’t hear any wind going in or out,” she said. “The air quality did improve. I have no doubt about that.”

    china smog
    Researchers say they hope to build larger smog towers in other cities in China.
     Kevin Frayer/Getty Images

    However, a teacher at the Meilun Tiancheng Kindergarten on the edge of the 10-square-kilometer (3.86-square-mile) zone said she had felt no change. “It’s just as bad as elsewhere,” she said.

    The experimental facility in Xian is a scaled-down version of a much bigger smog tower that Cao and his colleagues hope to build in other cities in China in the future.

    A full-sized tower would reach 500 meters (1,640 feet) high with a diameter of 200 meters (656 feet), according to a patent application they filed in 2014.

    The size of the greenhouses could cover nearly 30 square kilometers (11.6 square miles) and the plant would be powerful enough to purify the air for a small sized city.

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China will likely speed up its Belt and Road projects amid US tensions: Citi

Source:CNBC
Writer:Kelly Olsen
Date: December 12, 2018

China will likely speed up infrastructure projects in its ambitious Belt and Road Initiative amid trade tensions with the United States, Citi said in a report Tuesday.

Several Chinese companies and various sectors, including mining and transportation, are poised to benefit from that development, the report said.

The Asian giant announced the BRI in 2013, aimed at recreating and modernizing ancient Silk Road trade routes. It has become the signature foreign policy program of Chinese President Xi Jinping’s government.

 The program is an ambitious infrastructure project aimed at connecting more than 60 countries in Asia, Europe, Africa and the Middle East through overland and maritime routes.

But it has been widely criticized, amid concerns that the high debt incurred for projects might become unsustainable for countries such as Sri Lanka, and others could face risks due to political changes, including those in Malaysia.

China has elevated the program to a top national strategy, Citi said, adding that tensions with the U.S. mean Beijing is prepared to take a different approach in the construction projects in order to expand its influence in countries that are part of the initiative.

 China will likely “escalate the loan and shorten the project approval” process to quicken the pace of infrastructure building “so as to diversify trade and economic activities there away from the U.S.,” Citi analysts said in the report.

“We believe the BRI will primarily benefit the railway sector, given China’s distinct advantages globally in terms of technology and cost in railway infrastructure,” they said, noting that building of power plants, telecommunications facilities and ports should also increase.

‘Kinder, gentler’

Some Chinese firms stand to benefit from this, the report said, stating the examples of China Railway Group and China Railway Construction.

Others include Chinese train manufacturer CRRC — which produces rolling stock such as railroad cars, wagons and coaches — as well as equipment maker China Railway Signal & Communication, Citi said in its report. All are listed in Hong Kong.

Some industries are also set to make inroads.

“We see near-term opportunities for sectors such as commodity and mining, transportation and logistics, as well as finance,” Citi said, citing specific firms such as Chinese oil and gas company PetroChina and the Bank of China, both listed in Hong Kong. Shanghai-listed Conch Cement is also “well positioned to benefit from the initiative,” it said.

In a separate Citi report assessing the progress of the Belt and Road Initiative after its first five years, the U.S. bank suggested that China may be forced to modify the BRI into a “kinder, gentler” version that would sit better with its critics.

Some challenges include the heavy reliance on the U.S. dollar in order to fund the infrastructure projects, Citi said. Other pressures China continues to face include criticisms from recipient countries that projects are too favorable to China and “explicit opposition” from the U.S., the report said.

However, all that could contribute to Beijing becoming more open to changes, as seen in China’s “growing interest” in working with multilateral development banks to jointly finance projects, the report said.

But whatever modifications are made, the program is here to stay.

“Though it might change shape, the BRI is certainly not going away,” Citi noted.

 

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What you need to know to understand Belt and Road

Source: World Economic Forum

Writer: Bruno Maçães

There are two things everyone needs to know about the Belt and Road. First, as officials in Beijing will tell you, this grand project is measured in decades, with its conclusion planned for 2049, the centenary of the founding of the People’s Republic of China. Second, the initiative is both global and revolutionary. Its aim is to create a new order in world politics and the world economy.

Past equivalents to the Belt and Road would have to be just as shapeless and ambitious. Perhaps concepts such as “the West” come the closest — even in the manner that a metaphor came to acquire epochal significance. If the initiative succeeds, it is very likely that we shall use the name to refer to the new arrangements, much as we use “West” as a shorthand for the existing order.

What will the world look like after the Belt and Road? In the first Belt and Road summit in 2017 Xi Jinping hailed it as the “project of the century.” If all goes according to plan, the Belt and Road will change the shape of the world economy and world politics, returning us to a time when China occupied the center of global networks.

There will be new infrastructure, of course, and that will be an obvious and easy metric of success. In twenty or thirty years some of the new Belt and Road projects will likely stand as the highest example of what human ingenuity can achieve in its drive to master natural forces. A bridge crossing the Caspian Sea may make road transport between Europe and China fast and easy, changing old mental maps separating continents. The Kra Isthmus Canal in Thailand will do the same for the Indian and Pacific Oceans.

But infrastructure is ultimately a means. The geographic space being transformed must be connected before it can start to grow areas of economic activity; industrial parks along infrastructure routes are slowly integrated to establish regional value chains and eventually support China’s rise to a technological superpower, leading the transformations of the future.

Artificial intelligence, robotics, genetic engineering and space exploration. As it expands, the Belt and Road is bound to become increasingly futuristic. Self-driving vehicles on land, sea and air and trillions of connected devices worldwide will be empowered by a Belt, Road and Space fleet of China-centered satellites. Chinese companies are already planning to engage in deep-space economic activity, like building orbit solar power plants, and mining asteroids and the moon. One or more Sputnik moments – when Chinese technology leaps far ahead of what the West can do – will offer the final and most meaningful metric of success for the Belt and Road.

The Belt and Road will never become universal—just as the West never became universal—but in some areas of the world it will rule unimpeded and different shades of influence will be felt everywhere.

The problem is to determine the core of the new Chinese world picture and identify the main traits which it will come to impress upon the whole. Many of those traits are already visible in what is but the construction stage of the Belt and Road.

Virtues are regularly invoked. Countries have relations of dependence, generosity, gratitude, respect and retribution. Relations between countries are much more diverse and complex than in the more formal Western-led order. Ritual is important, and so is history. Nations are better seen as intersecting stories and power the ability to determine where the story goes next.

Even in its formative stage the Belt and Road is an exercise in the opacity of power. There is an exoteric doctrine of the initiative and then an esoteric practice where deals are agreed upon, often with no written evidence, and where hierarchy resembles that of security-clearance levels of access. The Belt and Road is like holy writ—never revealed completely and all at once, but only bit by bit and over many decades.

Rapid change, old-fashioned morality, and secret communication. This will be a world of soothsayers, saints, and spooks.

The Belt and Road may well never realize its goals. It may be abandoned as it runs into problems and the goals it sets out to achieve recede further into the distance. But success and failure are to be measured in terms of these goals, so we must start from them.

The new world the initiative will try to create is not one where one piece on the chessboard will be replaced, not even one where the pieces will have been reorganized. It will be a world built anew by very different people and according to very different ideas.

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How A Growing U.S.-China Rivalry Is Reshaping The Global Tech Landscape

Source: Forbes
Writer: Alex Capri
Date: December 09, 2018

For observers of the U.S.-China geopolitical rivalry, the arrest of Huawei’s CFO, Meng Wanzhou, in Canada, should serve as a wakeup call for the rest of the tech sector. The allegations against China’s telecom giant for breaching U.S. sanctions highlights the escalating technology race and hybrid cold war between the world’s two superpowers.

Washington and Beijing are now at a historical tipping point, and national security priorities are driving policies that will lead to further decoupling of American and Chinese interests. This, in turn, will lead to further fragmentation of global value chains in the tech sector.

Tech companies—or any firms that depend on cutting edge technology—will need to gauge their risk environment around two key factors: First, how to react to a wave of disruptive policy measures such as export controls, sanctions, blocked acquisitions and blocked technology transfers. Second, how to minimize the damage that will come as a result of disentanglement from existing technology ecosystems.

 Beijing’s provocative tech agenda

At the heart of this competition is the Made in China 2025 plan, Beijing’s strategy to lead the world in AI, robotics, aerospace and other industries.

China’s rapid advancement in technological capability has in many ways caught Washington and its allies flatfooted. Since 2017, For example, Beijing has been creating a navigational satellite constellation to rival America’s GPS. In 2018 alone, it launched 11 BeiDou satellites, some as few as 17 days apart.

 Beijing can now offer its partners an alternate version of America’s GPS, thereby undermining Washington’s geopolitical monopoly in this area, and it can  leverage the BeiDou program to extract concessions from its client states, such as agreements to buy more Chinese digital infrastructure and equipment.In the competition to win the battle of 5G standards— the technology that provides lightning-fast connectivity and better bandwidth in the internet of things (IOT)—China is leveraging its 650 million mobile internet users and its planned infrastructure along the digital Belt and Road to expand its global influence.

In a bid to become self-sufficient and cut its reliance on foreign semiconductor technology, Beijing is reportedly investing $31.5 billion in a National Integrated Circuit Industry Investment Fund, among other funds.

Lately, Beijing’s focus has increasingly turned to what it calls “civil-military fusion.” Recently, a series of state-backed venture capital funds have brought together tech startups and other private companies with the Peoples Liberation Army. In 2017, for example, the Foshan Civil-Military Innovation Industries Fund was launched to the tune of $28.75 billion.

Washington’s technology counter-offensive

The U.S. Department of Defence (DOD) now officially lists China as an “adversary.” A recent DOD report list key areas of strategic focus including Beijing’s efforts to leverage technology to modernize its military, and its plans to harness the Belt and Road Initiative to further enhance its economic clout. This has fed a popular narrative in Washington and beyond that China’s strategic ambitions need to be confronted and contained. Thus, firms should expect to see fewer technology transfers to Chinese companies, the blocking of deals (such as Huawei getting locked out of the U.S., Australia and possibly the U.K. and Japan) and the placement of targeted individuals and firms on sanctions lists. Whether all of this will produce the desired outcome by Washington and its allies is, of course, debatable.

The U.S. Export Control Reform Act, passed in August, will lead to the expansion of an export controls list. There will be new export licensing requirements for a broad range of so-called dual-use technologies–defined as technologies that can be use for commercial and military purposes. In the digital economy, this will impact a wide range of industries: robotics, AI, autonomous vehicles, even facial recognition technology. The effects could be widespread, with collateral damage to foreign firms.

Chinese smartphone maker ZTE serves as a cautionary tale. Its reliance on U.S. technology for both components like microchips and software from the Android operating system highlights China’s dependence on foreign suppliers.

Hikvision, China’s largest maker of facial recognition surveillance equipment, may suffer a fate similar to ZTE, as the U.S. government is threatening to ban Silicon Valley chipmakers from selling it American technology. Unlike ZTE, however, which avoided a likely collapse when Washington agreed to waive the technology ban, Hikvision may not be so lucky.

China’s major Achilles heel continues to be its dependence on foreign semiconductor technology. Every area of Beijing’s Made in China 2025 plan relies on foreign-owned integrated circuit technology, with much of it coming from five American manufacturers: AMD, Intel, Micron, Nvidia and Qualcomm.

Even Yangtze Memory, Beijing’s state-funded national champion, which recently announced that it had developed a state-of-the-art 64-layer 3D NAND flash memory chip, will depend entirely on critical early-stage equipment—needed for mass production—from foreign firms. Primary partners are Applied Materials and KLA-Tencor, both American companies.

The Scale of disentanglement

All of this leaves the global tech sector in a highly vulnerable position. Increasing U.S. export controls that restrict or block access to American technology could cause major damage to Beijing’s geopolitical aims. But foreign firms will suffer collateral damage as well, as they will be penalized for being imbedded with denied parties.

Over the past three decades, for example, the American companies named above have invested billions of dollars in collaborative ventures and production facilities in China. For all the world’s leading semiconductor firms, China will soon become their largest market.

According to PWC’s Global Strategy group, 80% of the corporate research and development (R&D) money spent in China in 2017 came from non-Chinese multinationals. Disentangling these ecosystems will require dismantling complex, intertwined relationships, with potentially heavy economic and financial consequences across global value chains.

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China’s real endgame in the trade war runs through Europe

Source: CNBC
Date: December 08, 2018

SCHLOSS ELMAU, GERMANY – Hungarian Prime Minister Viktor Orban recently shared some history with a friend, explaining why he reached out to China’s then-Premier Wen Jiabao in 2011, seeking urgent financial support and providing Beijing one of several European inroads in the wake of the 2008 financial crisis.

Orban’s reason was a simple one: survival. Facing a potential debt crisis and unwilling to accept austere loan conditions from Western institutions, Beijing offered a lifeline. For his part, Orban convened some Central European leaders with Beijing, and they laid the groundwork for the “16-plus-one” initiative based in Budapest that since then has provided China unprecedented regional influence.

It didn’t take long for China’s investment to bear fruit. In March 2017, Hungary took the rare step to break European Union consensus on human rights violations, refusing to sign a joint letter denouncing the alleged torture of detailed lawyers. In July of the same year, Hungary joined Greece – another distressed European target of Chinese largesse – in blocking reference to Beijing in a Brussels statement on the illegality of Chinese claims in the South China Sea.

 The Bavarian Alps might seem an unusual place to reflect on China’s growing global influence, in a week that begin with U.S. President Donald Trump and Chinese President Xi Jinping working to avoid a trade war in Argentina and advanced to Canadian authorities arrest of Chinese tech company Huawei’s CFO in Vancouver, at US request on suspicion of Iran sanctions violations.

Transatlantic strategy experts – convened at this breath-taking resort by the Munich Security Conference – were left to reflect on Europe’s unique vulnerability to this major power conflict in a world where they are absorbing the unanticipated shocks of greater US unpredictability, greater Chinese assertiveness and deeper European divisions about how to navigate it all.

“China already has shown it can have a veto power over European Union policy,” said Wolfgang Ischinger, chairman of the Munich Security Conference, on the margins of the off-record gathering he convened. He notes that while West European companies are driven by profit, their Chinese counterparts invariably also represent Chinese state interests. “That doesn’t have to be malign, but it can also be malign.”

European Union officials concede that China already has exercised veto power it has over policies that require unanimity, and because some officials are pushing privately for a change to majority voting. Concerns are growing as Beijing’s influence has grown more rapidly than anyone anticipated. Chinese foreign direct investment in the EU has risen to $30 billion in 2017 from 700 million before 2008.

That influence has grown more rapidly than anyone anticipated. Since the 2008 financial crisis, Chinese foreign direct investment in the EU has risen from 700 million Euro to 30 billion Euro in 2017.

A report by two German think tanks, the GPPI and Mercator Institute for China Studies, found that Beijing has taken full advantage of Europe’s openness and has been “rapidly increasing political influencing efforts in Europe.”

Political warfare

Some call it political warfare, using a nonmilitary toolbox of overt and covert means to exert its influence on political and economic elites, academia and public opinion. With these efforts, it weakens Western unity (and US attraction) and improves its image as an alternative to liberal democracy, the report concluded.

Growing Sino-US tensions have brought Europe new export chances in China but at the same time China has shifted considerable export and foreign investment efforts to Europe to replace lost American markets. In the first six months of this year, newly announced Chinese mergers and acquisitions into Europe were nine-fold the North America number at $20 billion compared to $2.5 billion and completed investments were six times higher at $12 billion compare to $2 billion.

At the same time, a new Trump-Xi trade deal could shake Europe as well, as China’s state driven economy could decide overnight to replace European products with US goods for political purposes.

The potential for an escalated Beijing-US struggle has left European experts scratching their heads over how they would choose sides or navigate the perils, particularly in the case where some countries and industries have much more at stake in China.

Some European officials speak of the need for “strategic autonomy” in the face of US sanctions extraterritorial reach on Iran and Secretary of State Mike Pompeo’s speech in Brussels this week where he questioned multilateralism and the European Union. At the same time, they worry more about what some call China’s “political warfare” of gathering economic, financial and thus also diplomatic influence.

The European Union hasn’t yet applied anything as restrictive on foreign investment as the US Committee on Foreign Investment in the United States (CFIUS), an interagency committee that reviews the impact of foreign investments on US national security. However, the EU this month passed a bill creating an unprecedented, if non-binding, screening scheme aimed at predatory Chinese investments.

Germans this week increased their focus on questions regarding a company called KUKA Robotics, which has become the poster child for the perils of high tech sales to the Chinese. With its industrial robotics production, KUKA was one of the nation’s greatest innovators for the 21st century economy until it was taken over by the Chinese company Midea in 2016.

Just last month, Midea was reversing previous assurances that it would not remove KUKA’s highly respected and long-time CEO, underscoring China’s ultimate control over cutting-edge robotics technology.

Despite facing new scrutiny, China is undeterred in its European strategy, taking advantage of European divisions, America’s trade strains with Europe and the urgent investment needs of particularly Southern and Eastern European countries.

Xi’s first state visits Spain and Portugal

Tellingly, President Xi made a stop in Spain on his way to Argentina and then again in Portugal for a two-day stint on his way back from the G-20 meeting, his first state visits to both countries.

Even before Xi’s visit, China had invested $12 billion in Portuguese projects ranging from energy, to transport, to insurance, financial services and media. During Xi’s visit, China and Portugal further deepened their economic partnership, with Lisbon agreeing to cooperate in China’s Belt and Road Initiative as it hopes to garner increased Chinese infrastructure and energy investments. China is also poised to take over a majority stake in EDP, Portugal’s largest business and a major EU energy provider.

In short, global markets and news reports miss the real story with their single-minded focus on whether or not President Trump and President Xi can reduce tensions and close a trade deal over the next 90 days. The bigger game, increasingly apparent in Europe, is whether China can replace the United States over time or at the very least significantly reduce its influence.

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One Belt, One Road, One Big Mistake

Source: Foreign Policy
Author: 
Date:  

The headlines coming out of this year’s APEC conference in Papua New Guinea focused on the conflict between America and China that kept the forum from issuing a joint communiqué. Less noticed were two short memorandums released on the sidelines of the conference by the island nations of Vanuatu and Tonga. In return for renegotiating existing debt, both agreed to become the newest participants—following other Pacific nations like Papua New Guinea and Fiji—in Chinese President Xi Jinping’s signature foreign-policy venture, the Belt and Road Initiative (BRI).

As Xi’s trillion-dollar development strategy has snaked away from the Eurasian heartland and into the South Pacific, western Africa, and Latin America, concern has grown. Many Americans fear that the Belt and Road Initiative is an extension of efforts by the Chinese Communist Party (CCP) to undermine the security and economic architecture of the international order. China’s growing largesse, they worry, comes largely at the expense of international institutions and American influence.

This angst lies behind another announcement made at last month’s APEC gathering: Australia, Japan, and the United States declared that they had formed their own trilateral investment initiative to help meet infrastructure needs in the Indo-Pacific. For some this is not enough: In its most recent report to the United States Congress, the bipartisan U.S.-China Economic and Security Review Commission recommended that Congress create an additional fund “to provide additional bilateral assistance for countries that are a target of or vulnerable to Chinese economic or diplomatic pressure.”

This is the wrong response to the Belt and Road Initiative. Ignore the hype: For the Chinese, this initiative has been a strategic blunder. By buying into the flawed idea that barrels of money are all that is needed to solve complex geopolitical problems, China has committed a colossal error. Xi’s dictatorship makes it almost impossible for the country to admit this mistake or abandon his pet project. The United States and its allies gain nothing from making China’s blunders their own.

In Xi’s speeches, the phrase most closely associated with the Belt and Road Initiative is “community of common destiny.” Xi’s use of this term is meant to link the BRI to the deeper purpose party leaders have articulated for the CCP over the last three decades. China’s leaders believe that not only is it their “historic mission” to bring about China’s “national rejuvenation” as the world’s most prestigious power, but that China has a unique role to play in the development of “political civilization” writ large.

It is the Chinese, Xi maintains (as Hu and Jiang did before him), who have adapted socialism to modern conditions, and in so doing have created a unique Chinese answer to “the problems facing mankind.” Though this answer began in China, Xi is clear that the time has come for “Chinese wisdom and a Chinese approach” to benefit those outside of China. The Belt and Road Initiative is intended to do just that. By using the Chinese model of socialism to develop the world’s poorer regions, the initiative justifies Xi’s grandiose claims about the party’s historic mission on the international stage.

To match these lofty aims, Chinese academics and policy analysts at prestigious party think tanks have articulated more down-to-earth goals for the initiative. According to them, the BRI promises to integrate China’s internal markets with those of its neighbours. Doing so will bring its neighbours closer to China geopolitically and bring stability to the region. By increasing economic activity in China’s border regions, such as Xinjiang and Tibet, the Belt and Road Initiative will lessen the appeal that separatist ideology might have to the residents. Another projected benefit is the energy security that will come through the construction of BRI-funded transport routes. Finally, by articulating and then following through on an initiative that puts common development over power politics, China will gain an advantage over other major countries (read: Japan and the United States) who present the world as a black-and-white competition for hegemony. The community of common destiny, these analysts have claimed, is a community that will immensely benefit China.

As the Belt and Road Initiative is only five years old (and many of its main members have been involved for a far shorter time) its full results cannot yet be judged. However, a preliminary assessment can be offered for BRI projects in South and Southeast Asia, the region described by Chinese leaders as the “main axis” of the Belt and Road Initiative. It is here that BRI investment is strongest and has been around longest. The picture is not promising. The hundreds of billions spent in these countries has not produced returns for investors, nor political returns for the party. Whether Chinese leaders actually seek a financial return from the Belt and Road Initiative has always been questionable—the sovereign debt of 27 BRI countries is regarded as “junk” by the three main ratings agencies, while another 14 have no rating at all.

Investment decisions often seem to be driven by geopolitical needs instead of sound financial sense. In South and Southeast Asia expensive port development is an excellent case study. A 2016 CSIS report judged that none of the Indian Ocean port projects funded through the BRI have much hope of financial success. They were likely prioritized for their geopolitical utility. Projects less clearly connected to China’s security needs have more difficulty getting off the ground: the research firm RWR Advisory Group notes that 270 BRI infrastructure projects in the region (or 32 per cent of the total value of the whole) have been put on hold because of problems with practicality or financial viability. There is a vast gap between what the Chinese have declared they will spend and what they have actually spent.

There is also a gap between how BRI projects are supposed to be chosen and how they actually have been selected. Xi and other party leaders have characterized BRI investment in Eurasia as following along defined “economic corridors” that would directly connect China to markets and peoples in other parts of the continent. By these means the party hopes to channel capital into areas where it will have the largest long-term benefit and will make cumulative infrastructure improvements possible.