Chinese President to skip G-20 meeting

Who shows up where can be very revealing 

According to Bloomberg, for the first time since he took power, Chinese President Xi Jinping will skip a Group of 20 summit. Instead, China is sending Premier Li Qiang to the event hosted by India’s Prime Minister Narendra Modi. That’s a clear signal of the relative value he places on the G-20 — set up with US backing in the late 1990s — versus the newly expanding BRICS grouping. 

Xi just made one of his rare 2023 overseas visits last month, to attend the BRICS summit in South Africa, where he successfully pressed for its expansion to include commodity powerhouses including Saudi Arabia, Argentina and the United Arab Emirates.

The new BRICS-11 will account for a major share of key global inputs, according to calculations by Center for Strategic and International Studies researchers Gracelin Baskaran and Ben Cahill: a) 42% of the world’s oil supply, b072% percent of rare earth minerals- with three of the five nations with the largest reserves, c) 75% of the world’s manganese, d) 50% of global graphite and e) 28% of nickel

“It is quite possible that a more coordinated approach” toward export restrictions to the rest of the world could now develop among the BRICS-11, the CSIS analysts wrote.

In the energy field, the group features both major oil and gas producers as well as two of the largest importers, in China and India.

Therefore, there is an incentive for members to set up mechanisms to trade commodities outside the reach of the G-7 financial sector, Baskaran and Cahill wrote.

Ex-Treasury Secretary Lawrence Summers — who was in government when the G-20 began — says the enlarged BRICS is a symptom of the US abdicating global leadership in the cause of economic nationalism. Whereas Washington once championed free-trade deals, now its focus is on import restrictions and a buy American bias, he says.

Whenever anybody says they care about producers, not low prices for consumers, they are adopting a negative sum, ‘all-against-all’ vision of international economic policy that invites challenges to the post-WWII vision the US once championed, says Summers, a paid contributor to Bloomberg Television.

The BRICS-11 has its own challenges. Bloomberg’s geo-economics team, led by Jennifer Welch, cautions that the dollar is unlikely to be dethroned by any push by the group to use alternatives.

India-China border tensions, part of the backdrop to Xi’s skipping the G-20, are a bar to BRICS-11 coordination. President Joe Biden, who will be showing up in New Delhi this week, has every incentive to keep Modi aloof from China. Treasury Secretary Janet Yellen’s attendance marks her fourth visit to India in 10 months, highlighting the US focus on that relationship.

Biden and Xi will both be no-shows at the Asean summit of Southeast Asian nations and key trading partners in Jakarta, Indonesia, this week, a missed chance for both.

Japan’s Prime Minister Fumio Kishida will be — a great opportunity for this key US ally to show support for the region in the wake of a provocative Chinese map that sowed acrimony there.

And to share a stage with regional counterparts as China tries to isolate Japan over its discharge of treated wastewater from wrecked Fukushima reactors into the Pacific.

 

Can Wang Yi improve US-China relations?

According to Nikkei Asia, Chinese President Xi Jinping's decision to recall senior diplomat Wang Yi to head the Ministry of Foreign Affairs reflects a misstep, but it could be a crucial move ahead of US-China summit in November 2023.

"Qin Gang's fall from grace was as unexpected and abrupt as his elevation over the heads of many experienced diplomats," said Daniel Russel, a former diplomat who now is an expert at the Asia Society Policy Institute, United States. "Since both moves are attributed to China's leader, this episode will be seen as an embarrassing lapse in judgment at the top."

By and large, analysts do not expect any change to the direction of China's foreign policy, guided by Xi's thinking on diplomacy, aimed at seeking to assert global influence in line with the country's development achievements.

"Whether this is, in fact, effectively a placeholder appointment until a younger official gets the nod is unclear, but for now Wang is the most dominant foreign affairs official in China for a very long time," said Bill Bishop, a China expert at sinocism.com.

Known for his tough-talking style, the 69-year-old Wang held the ministerial portfolio for a decade before being promoted in October last year to head the Communist Party's Foreign Affairs Commission in charge of policymaking. He is also a member of the party's top decision-making body, the Politburo.

"Wang's oversight of policy implementation is therefore likely to strengthen the consistency of Beijing's diplomatic messaging and actions, while further cementing the party's already strong guidance of foreign affairs," US consultancy Eurasia Group wrote in a note.

His return, while signaling a comeback for more aggressive "wolf warrior" diplomacy, is seen as crucial ahead of a series of international events, notably the Asia Pacific Economic Cooperation summit to be hosted by the United States later this year.

"A key agenda item in US-China relations is whether the working and ministerial level can set the conditions for a successful visit of Xi to San Francisco for APEC in November," said Rorry Daniels, a senior fellow at the Asia Society Policy Institute's Center for China Analysis.

Reappointing Wang also reflects Xi's preference for someone with a track record of defending China's positions, such as its stance on Taiwan, well as asserting the country's interests amid geopolitical tensions with the United States and its allies.

"This could complicate the Biden administration's efforts to maintain and build on the recent detente in the bilateral relationship," Eurasia Group wrote.

Wang's reappointment has been broadly welcomed in Indonesia. "Wang Yi's return could even be bringing a sense of predictability and ease to Indonesian ministers, who already have good relations with him for a long time," said one analyst, who spoke on condition of anonymity.

China to send special envoy to Ukraine

Chinese President Xi Jinping spoke to Ukrainian counterpart Volodymyr Zelensky over the phone on Wednesday. The call was the first time the two leaders had talked since the Russian invasion of Ukraine in February 2022.

China has faced mounting criticism over its stance on the war, with Beijing’s assertion of neutrality failing to convince Western governments because of its disproportionate interaction with Moscow.

During the call, Xi pledged long-term cooperation with Ukraine, and said China will send its special envoy on Eurasian affairs to Ukraine and other countries.

The envoy, former vice-minister of foreign affairs Li Hui, would be the most senior Chinese official to set foot on Ukrainian soil since the war began. He was China’s ambassador to Russia for 10 years, from 2009 to 2019.

Xi also said mutual respect for sovereignty and territorial integrity was the political foundation of bilateral relations.

He did not mention Russia by name at all, according to the CCTV report, though he reiterated China’s stance on the war and called for more dialogue.

Xi had held multiple calls with Russian President Vladimir Putin since the invasion, and even led a delegation to Moscow in March – his first overseas trip since beginning a historic third term.

The call also came just two weeks after French President Emmanuel Macron and European Commission President Ursula von der Leyen visited China and said they had urged Xi to call Zelensky.

Xi had replied that the conversation could happen when the conditions and time are right, according to von der Leyen.

 

China: Reactions to 20th Communist Party Congress

Reuters has done a good job by compiling initial reactions on Xi Jinping securing a precedent-breaking third leadership term. However, if my readers find these tweaked, remember that the job was done by a western news agency.

China's Xi Jinping secured a precedent-breaking third leadership term on Sunday and introduced a new Politburo Standing Committee stacked with loyalists, cementing his place as the country's most powerful ruler since Mao Zedong. Following are the initial reactions from analysts and experts:

ALVIN TAN, HEAD OF ASIA FX STRATEGY, RBC CAPITAL MARKETS, SINGAPORE

“It does look like it’s dominated by Xi’s allies.”

“In terms of policymaking, it does mean that there is likely to be more deference to Xi Jinping’s own views about how to move the country and the economy forward... I can imagine that zero-COVID policy is likely more entrenched and there’s going to be further push on this issue of common prosperity and the like.”

DREW THOMPSON, VISITING SENIOR RESEARCH FELLOW AT NATIONAL UNIVERSITY OF SINGAPORE'S LEE KUAN YEW SCHOOL OF PUBLIC POLICY

"This is a leadership that will be focused on achieving Xi’s political goals, rather than pursuing their own agendas for what they think is best for the country. There is only one correct way to govern, and that is Xi’s way.

"Foreign investors and businesses have desperately searched for signs that liberals or 'reformers' will play a role in shaping the economy or bringing back an old economic order that prioritized foreign investment and liberalization of the economy. It is clear from the outcome of the 20th Party Congress that national security and the party’s political security will take precedence over economic growth."

RICHARD McGREGOR, SENIOR FELLOW FOR EAST ASIA, LOWY INSTITUTE, SYDNEY

"The result was a resounding victory for Xi, more decisive than many experienced observers had forecast. All of his rivals, potential and real, have been forced out of the Politburo Standing Committee and Xi loyalists took their place. The new Politburo is an emphatic statement of Xi’s dominance over the party.

"I think the congress has drawn a line between the past and the future in profound ways, both for Chinese domestic politics and the way in which its influence spills out into the rest of the world.

"Xi has dispensed with the old factional system, such as it was. He has crushed expectations that he would nurture a successor. He has ignored the informal age caps on officials serving in top positions."

CHRIS MILLER, PROFESSOR AT TUFTS UNIVERSITY, MASSACHUSETTS

“The party congress has reaffirmed Xi's decisive role in ruling the Communist Party, marking a continued shift away from collective leadership of party elites toward a personalized dictatorship. It also appears to have confirmed the downgrading of economic growth as a key party goal, relative to other agenda items such as zero-COVID and the party's political and ideological control. On tech, the key theme was self-sufficiency in science and technology, which is to be expected given the increasing decoupling of the US and Chinese tech sectors.”

GARY NG, SENIOR ECONOMIST, ASIA PACIFIC, NATIXIS, HONG KONG

“The new inner circle will extend and heighten the current policy stance, and generally it seems that most of the newly appointed officials seem to be Xi’s key allies. So I guess this is also a move of the further consolidation of power, or maybe in the future, of course, performance is important, but also loyalty is increasingly a key concern when picking officials.”

JA IAN CHONG, POLITICAL SCIENTIST, NATIONAL UNIVERSITY OF SINGAPORE

"It certainly seems to be a consolidation of Xi’s position. This means that policies will be more directly attached to Xi for good or ill. I guess that translates to more focus on party-state control over business, less dependence on imports even as the PRC (People's Republic of China) seeks to export. So probably more direct party-state direction of the economy. Investment will likely seek to meet those above goals, especially if they can bring in technology. So while there may be opportunities for investors, they have to look to both market forces and political preferences more. So more of what we have already been seeing.

"Probably no lifting of COVID-zero policy in the near future, and more assertiveness in foreign and security. Even more broadly, US-PRC friction will continue to grow."

DYLAN LOH, ASSISTANT PROFESSOR, NANYANG TECHNOLOGICAL UNIVERSITY

"It's quite clear that the Politburo have been stacked with Xi loyalists and that would mean he has a much freer rein and mandate in pursuing his domestic and foreign policies as collective leadership and decision making has been de-emphasized over coalescing around Xi and implementing his decisions. It seems that he has not elevated a potential successor for now, which gives him the flexibility for a fourth term. Regarding investment, I do not think China's policies will turn sharply because of this line up, I think by and large Xi's priorities have not changed."

"Wang Huning’s presence also indicates to me that the ideological bent of the party and Xi will continue and even deepen."

PEIQIAN LIU, CHINA ECONOMIST, NATWEST MARKETS, SINGAPORE

“It’s kind of in line and a surprise. What has been in line with expectations is really (that) President Xi is consolidating his power... And what’s been surprising is that there have been four people sort of retired from the Standing Committee – that’s more than our initial expectation of two.”

“It does look like Xi is having more say within the Politburo Standing Committee, and also with his ideology being written in the party’s charter, that’s a symbolization of him being more strategically important within the political committee.”

 

Chinese President’s most audacious geopolitical bet

A head-spinning series of seemingly disparate moves over recent months add up to nothing less than a generational wager that Chinese President, Xi Jinping  can produce the world’s dominant power for the foreseeable future by doubling down on his state-controlled economy, party-disciplined society, nationalistic propaganda, and far-reaching global influence campaigns.

With each week, Xi raises the stakes further, from narrowing seemingly mundane personal freedoms like karaoke bars or a teenager’s permitted time for online gaming to three hours weekly to the multi million US dollar investor hit from his increased controls on China’s biggest technology companies and their foreign listings.  

It is only in the context of Xi’s increased repressions at home and expanded ambitions abroad that one can fully understand Australian Prime Minister Scott Morrison’s decision this week to enter a new defense pact, which he called “a forever agreement,” with the United States and the United Kingdom.

Much of the news focus was either on the eight nuclear-powered submarines that Australia would deploy or the spiraling French outrage that their own deal to sell diesel submarines to Australia was undermined by what French officials called a “betrayal” and a “stab in the back” from close allies. France went so far as to recall its ambassador to the United States for the first time in the history of the NATO alliance.

All that noise should not distract from the more significant message of the ground-breaking agreement. Prime Minister Morrison saw more strategic advantage and military capability from the US-UK alignment in a rapidly shifting Indo-Pacific atmosphere, replacing his previous stance of trying to balance US and Chinese interests.

“The relatively benign environment we’ve enjoyed for many decades in our region is behind us,” Morrison said on Thursday. “We have entered a new era with challenges for Australia and our partners.”

For China, that new era has many faces: a rapid rollback of economic liberalization, a crackdown on individual freedoms, an escalation of global influence efforts and military buildup, all in advance of the 20th national party congress in October 2022, where Xi hopes to seal his place in history and his continued rule.

Former Australian Prime Minister Kevin Rudd, one of the world’s leading China experts, points to Xi’s “bewildering array” of economic policy decisions in a recent speech as president of the Asia Society.

They started last October with the shocking suspension of Alibaba financial affiliate Ant Group’s planned initial public offering in Hong Kong and Shanghai, clearly aimed at Alibaba co-founder Jack Ma. Then in April, Chinese regulators imposed a $3 billion fine on Alibaba for “monopolistic behavior.”

In July, China’s cyber regulator removed ride-hailing giant Didi from app stores, while an investigative unit launched an examination of the company’s compliance with Chinese data-security laws.

Then this month, China’s Transport Ministry regulators summoned senior executives from Didi, Meituan and nine other ride-hailing companies, ordering them to “rectify” their digital misconduct. The Chinese state then took an equity stake in ByteDance, the owner of TikTok, and in Weibo, the micro-blogging platform.

Xi was ready to accept the estimated US$1.1 trillion cost in shareholder value wiped from China’s top six technology stocks alone between February and August. That doesn’t factor in further losses among the education, transportation, food delivery, entertainment and video gaming industries.

Less noticed have been a dizzying array of regulatory actions and policy moves whose sum purpose appears to be strengthening state control over, well, just about everything. 

“The best way to summarize it,” says Rudd, “is that Xi Jinping has decided that, in the overall balance between the roles of the state and the market in China, it is in the interests of the Party to pivot toward the state.” Xi is determined to transform modern China into a global great power, “but a great power in which the Chinese Communist Party nonetheless retains complete control.”

That means growing controls as well over the freedoms of its 1.4 billion citizens.

Xi has acted, for example, to restrict the video gaming of school-aged children to three hours a week, and he has banned private tutoring. Chinese regulators have ordered broadcasters to encourage masculinity and remove “sissy men,” or niang pao, from the airwaves. Regulators banned “American Idol”-style competitions and removed from the internet any mention of one of China’s wealthiest actresses, Zhao Wei.

“The orders have been sudden, dramatic and often baffling,” wrote Lily Kuo in the Washington Post. Jude Blanchette of the Center for Strategic and International Studies says, “This is not a sector-by-sector rectification; this is an entire economic, industry and structural rectification.”

At the same time, President Xi has launched a push to share the virtues and successes of the Chinese authoritarian model with the rest of the world. 

“Beijing seeks less to impose a Marxist-Leninist ideology on foreign societies than to legitimate and promote its own authoritarian system,” Charles Edel and David Shullman, the recently appointed director of the Atlantic Council’s new China Global Hub, wrote in “Foreign Affairs.” “The CCP doesn’t seek ideological conformity but rather power, security, and global influence for China and for itself.”

The authors detail China’s global efforts to not remake the world in its image, but rather “to make the world friendlier to its interests — and more welcoming to the rise of authoritarianism in general.”

Those measures include “spreading propaganda, expanding information operations, consolidating economic influence, and meddling in foreign political systems” with the ultimate goal of “hollowing out democratic institutions and norms within and between countries,” Edel and Shullman write.

Within President Xi’s bold bet lie two opportunities for the US and its allies.

The first is that Xi, by overreaching in his controls at home, will undo just the sorts of economic and societal liberalization China needs to succeed. At the same time, the world’s democracies, like Australia, are growing more willing to seek a common cause to address Beijing.

In the end, however, Xi’s concerted moves require an equally concerted response from the world’s democracies. The French-US crisis following the Australian defense deal this week provides just one example of how difficult that will be to achieve and sustain.