By STUART LAU
with PHELIM KINE
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WELCOME BACK TO CHINA WATCHER! We’re back in your inbox this week for a quick update of everything that you’ve missed about China while on holiday, with Stuart Lau reporting in Brussels and Phelim Kine in D.C.
EU, US COMMERCE CHIEFS PLAN VISITS
ALMOST THERE: Both U.S. Commerce Secretary Gina Raimondo and EU Trade Commissioner Valdis Dombrovskis are scheduled to visit China shortly. The mood, however, has changed since their visits were first planned. While the U.S. and EU were initially hoping to reestablish direct official contacts with China to scale back diplomatic tensions, including over Taiwan and de-risking, Beijing now has more pressing issues — at home. Facing potential real estate crises, Chinese officials are keen to shore up Western interests in Asia’s top economy.
From Washington with not much love: Raimondo is expected to land in Beijing later this week. As Phelim reported with Doug Palmer, while Raimondo will be promoting U.S. exports, Chinese officials are likely going to pressure her to ease up on long-standing trade restrictions and "de-risking" measures — particularly on semiconductors and high-end technologies.
And from Brussels, many complaints: Dombrovskis, also an executive vice-president of the European Commission, will pile pressure on Beijing to fix the trade imbalance that the Asian superpower has built over the European bloc when he visits Beijing in the “second half of September,” according to Gunnar Wiegand, the Asia Pacific managing director at the European External Action Service.
“To say [it] clearly, we expect a more effective continuation of the Chinese market opening policy,” Wiegand told China Watcher. “You have seen over the last two years incredibly strong growth of EU-China trade … The problem is that this was linked to a massive increase of China's exports to Europe.”
— In numbers: “In 2022, the total volume of trade in goods was about €853 billion, [of which] it contains a €400 billion trade deficit,” he said. “I understand lately, this is being addressed now — addressed in the sense [there is] a better export performance of European industry. But I want to point out this because we have a very strong economic underpinning of this overall [EU-China] relationship, and the imbalances which exist have grown, and this needs to be addressed.”
BIDEN WATCHING CHINESE ECONOMIC WOES: Fixing the trade imbalances requires China to buy more from the West, but that may be easier said than done. "China is in trouble," Biden told donors at a Democratic Party fundraiser in Utah earlier this month. "They have got some problems — that's not good, because when bad folks have problems, they do bad things."
Plea from the Hill: "We urge you, prior to your trip, to publicly clarify that U.S. export controls are non-negotiable, and that the PRC should expect more, not less, U.S. export controls moving forward," Rep. Mike Gallagher (R-Wis.), chair of the House Select Committee on the CCP; House Foreign Affairs Chair Michael McCaul (R-Texas) and other lawmakers wrote in a letter to Raimondo on Friday. Other lawmakers warn of the optics of Raimondo traveling to Beijing just weeks after revelations that Chinese hackers had broken into her email account.
XI IN BRICS SUMMIT
JO’BURG SETS STAGE FOR ANTI-WEST ALTERNATIVE: For China's leader Xi Jinping, the economic slowdown is not the issue top of his mind this week, as he is planning to attend the BRICS leaders summit starting today, with a view to reshaping the West-led global order.
Gaining momentum? The five nations of Brazil, Russia, India, China and South Africa are poised to discuss ways to better exploit the bloc's New Development Bank and potentially expanding the group to candidate countries like Argentina, Venezuela, Iran or Saudi Arabia (more on the candidate countries courtesy Reuters). "An expanded BRICS will represent a diverse group of nations which share a common desire to have a more balanced world order," South African President Cyril Ramaphosa said on Sunday, Sarah Anne Aarup writes in to report.
China seeks to rival the U.S.: "If we expand BRICS to account for a similar portion of world GDP as the G7, then our collective voice in the world will grow stronger," an anonymous Chinese official told the Financial Times — in a heavy hint at wanting to rival the Western group of major economies.
Internal tussle: But in the background, a geo-economic struggle is brewing: whereas China seeks to expand its geopolitical heft by adding new members to rival Western-led blocs, countries such as Brazil and India are more circumspect. After all, New Delhi is in a difficult position vis-à-vis its neighbor Beijing— not least because of their simmering border dispute — so not all BRICS countries might rally behind the Chinese (and Russian) flag.
Not invited: Coincidentally, French President Emmanuel Macron wanted to join the fun but wasn't invited to Johannesburg because the Kremlin didn't want him there.
Not joining: Russian President Vladimir Putin is staying far away from South Africa this time around lest he get arrested because of the international warrant from the International Criminal Court. South Africa's a signatory of the Rome Statute and a participant in the ICC.
SPYBUSTING SEASON
CIA INFORMERS’ ARRESTED: China’s Ministry of State Security announced the arrest of a Chinese citizen for allegedly spying for the U.S. Central Intelligence Agency, the second such rare and high-profile disclosure in 10 days.
Approached in Tokyo: According to the ministry statement, widely reported on Chinese state media, it is investigating a 39-year-old surnamed Hao from an unidentified ministry. Hao, whose gender was not disclosed, was recruited by the CIA while studying in Japan, where the person signed an espionage agreement and received training from the U.S.
Like the previous case, China accused the U.S. of recruiting its citizens in third countries. Earlier this month, a Chinese national surnamed Zeng, 52, who worked for a military-industrial group, was first approached by the CIA in Italy, where he gradually developed “psychological dependency” on a CIA personnel over dinner parties, outings and visits to the opera.
China has been stepping up anti-espionage measures at home as the geopolitical tension with the U.S. rises. The two arrests were also announced just weeks after CIA director William Burns said the agency has “made progress” and worked “working “very hard over recent years to ensure that we have strong human intelligence capability” in China. In the U.K., spy agency MI6’s chief Richard Moore told POLITICO last month that “we now devote more resources to China than anywhere else.”
TELCO BATTLE IN UKRAINE
KYIV FACES A CONUNDRUM: Shall it use Chinese telecommunications kit to repair its shattered infrastructure, or side with Western allies in icing out the likes of Huawei and ZTE.
Either decision carries risk: Cutting Chinese equipment from networks could come at a steep cost even if it plays well with the United States and Europe. On the other hand, China's willingness to discreetly deliver military equipment to Moscow, as previously reported by POLITICO, demonstrates its friendliness toward Kyiv's antagonist.
"It must be clearly understood that today China has already determined its position regarding Ukraine," Yuriy Matsyk, the head of fixed broadband at the Ukrainian Ministry for digital transition, told POLITICO’s Mathieu Pollet.
"Today America and Europe are very acutely raising the question: 'Why are there no measures regarding Chinese contractors?’" Matsyk said. "We absolutely support the position regarding the ban on Chinese equipment for government agencies. It was an initiative of the Committee of the Parliament of Ukraine," he said.
But but but: This potential ban, Matsyk warned, "can also be implemented in different ways" and has been taken "into development" at the National and Defense Council of Ukraine, a state task force presided over by President Volodymyr Zelenskyy.
Read Mathieu’s full story on POLITICO Pro.
MORE TECH FOCUS: China is also interested in shaping the future of metaverse. Gian Volpicelli has the story.
TRANSLATING WASHINGTON
BEIJING BASHES TAIWAN VP LAI, AGAIN: China's Foreign Ministry used a chunk of its press briefing on Monday to rage about Taiwan Vice President Lai Ching-te's recent stopovers in the U.S. to and from Taiwan's diplomatic ally Paraguay and his recent interview with Bloomberg. Lai is "betraying the interests of his nation to advance his selfish agenda and brazenly soliciting U.S. support for 'Taiwan independence,'" Chinese Foreign Ministry spokesperson Wang Wenbin said. Wang's comments follow Chinese embassy spokesperson Liu Pengyu’s accusation that Lai is seeking to "sell out Taiwan to the U.S.." in a letter published in the Wall Street Journal on Friday. Liu and Wang may have been triggered by American Institute in Taiwan Chair Laura Rosenberger’s social media pics last week of her meeting with Lai and Taiwan's de facto ambassador to the U.S., Bi-khim Hsiao, while Lai transited San Francisco.
BIDEN'S JAPAN-S.KOREA TRILATERAL BAITS BEIJING: President Biden signed historic agreements with Japan's Prime Minister Fumio Kishida and South Korean President Yoon Suk Yeol at Camp David on Friday aimed to forge a common front against the risk of regional instability posed by China and North Korea.
The first trilateral meeting between the three countries that wasn't held on the sidelines of an international meeting produced joint agreements to improve coordination on ballistic missile defense and information sharing, to contribute economic data such as an early warning system for supply chain disruptions, and to better coordinate national security such as multiyear plans to hold military exercises, POLITICO's Jennifer Haberkorn and Jonathan Lemire reported on Friday.
— Calling out you-know-who: Diplomats from the three countries wrestled up to the last moment over whether to explicitly mention China in the meeting's final texts, as Phelim reported on Thursday. In the end, the three leaders name-checked China 11 times in their joint press conference while trying to underplay the degree to which they were targeting Beijing. “The summit was not about China — that was not the purpose of the meeting but China obviously came up," Biden told reporters.
China came up most prominently in the "Spirit of Camp Joint Statement of Japan, the Republic of Korea, and the United States" which singled out Beijing for "dangerous and aggressive behavior supporting unlawful maritime claims" and in the leaders' call for "peace and stability across the Taiwan Strait." Beijing is unhappy. The summit leaders "smeared and attacked China on Taiwan and maritime issues — an act of gross interference in China's internal affairs, a deliberate attempt to sow discord between China and our neighbors," the Chinese Foreign Ministry's Wang said on Monday.
BIDEN CLINCHES BEIJING-COUNTERING VIETNAM DEAL: Biden will chalk up a fresh victory in his campaign to boost U.S. influence in the Indo-Pacific by sealing a deal with Vietnam next month aimed to draw Hanoi closer to Washington at a time of rising tensions with Beijing. Biden will sign a strategic partnership agreement with Vietnam during a state visit to the Southeast Asian country in mid-September, according to three people with knowledge of the deal's planning. They were granted anonymity because they weren't authorized to speak on the record about the agreement. The agreement will allow for new bilateral collaboration that will boost Vietnam's efforts to develop its high technology sector in areas including semiconductor production and artificial intelligence. You can read Phelim's full story here.
MANY THANKS: To editor Christian Oliver, reporters Sarah Anne Aarup, Doug Palmer, Mathieu Pollet, Gian Volpicelli, Jennifer Haberkorn, Jonathan Lemire and producer Jeanette Minns.
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