By PHELIM KINE
with STUART LAU
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Hi, China Watchers. Today we unpack Beijing's Israel-Gaza conflict messaging motives, parse the cost-benefit ratio of the return of U.S.-China economic dialogues and distill U.S. Ambassador to China Nicholas Burns' latest assessment of bilateral relations. And we profile a book that claims that allegations of Chinese firms — including Huawei! — operating as overseas tools of the Chinese Communist Party reflect "propaganda and fear rather than facts."
Let's get to it. — Phelim
China sees opportunity in the latest Middle East crisis
China's awkward messaging on Hamas' attack on Israel reflects Beijing's quest for long-term diplomatic gain from the unfolding chaos.
Beijing's initial statement failed to condemn Hamas for this weekend's attack. That prompted Senate Majority Leader Chuck Schumer, who was leading a congressional delegation to China starting over the weekend, to hector Chinese paramount leader Xi Jinping for soft-pedaling Hamas' atrocities. China's Foreign Ministry later issued a statement more explicitly condemning harm to civilians, but the damage was done.
Beijing's apparent calculus: take a short-to-medium hit to its lucrative trade ties with Israel in exchange for a longer-term influence gain among countries where support for the Palestinian cause runs deep. That aligns with China's efforts to rally African, Latin American and other countries around its concept of "true multilateralism" — an explicit rival to the U.S.-dominated international system.
"This will be an opportunity for China to further articulate and promote the Global Security Initiative as a different way to approach the region and the region's problems," said Dawn Murphy, associate professor of national security strategy at the National War College and an expert on China's relations with the Middle East.
POLITICO's Nahal Toosi, Andrew Zhang and I have the full story here.
'The Chinese are chuckling' — the holes in Biden's bilateral dialogues
Yes, the U.S. and Chinese governments are talking again. But there are doubts the juice is worth the squeeze.
Treasury Secretary Janet Yellen announced two weeks ago that her trip to Beijing in July had produced new Economic and Financial Working Groups. That follows on the heels of Commerce Secretary Gina Raimondo's unveiling of a new working group on commercial issues and a new export control enforcement "information exchange" dialogue in August.
Yellen and Raimondo say the mechanisms are worth a shot. "We are not returning to the days when we had dialogue for dialogue's sake," Raimondo said in August. Treasury's new working groups are "important forums to communicate America's interests and concerns," Yellen said last month in a post on the X social media platform.
Treasury has learned the lessons of failed past dialogues hobbled by overly-broad objectives by restricting the new working groups to a limited number of topics, said a Treasury spokesperson granted anonymity because they aren't authorized to speak on the record. The Commerce Department confirmed that conversations within its bilateral working groups continue but declined to provide further details.
China has a preference for economic talks as it seeks to mitigate targeted export control restrictions and reassure wary U.S. investors as the Chinese government struggles with faltering economic growth.
Meanwhile Beijing is continuing a now 14-month freeze on high-level military contacts and suspended cooperation in areas including counternarcotics and transnational crime.
Here we go again. The new groupings under Commerce and Treasury have echoes of past bilateral working groups and dialogues spanning multiple administrations — think President George W. Bush's Strategic and Economic Dialogue, the Obama administration's upgraded version of that forum and President Donald Trump's Comprehensive Economic Dialogue. Those now-defunct mechanisms absorbed significant resources with arguably underwhelming results.
They "never meaningfully addressed structural issues … and created a process where the United States was hesitant to disrupt the dialogues by pushing back against bad Chinese behavior when it occurred," said Hal Brands, former special assistant to the Secretary of Defense for Strategic Planning from 2015 to 2016. He's now a professor at the Johns Hopkins School of Advanced International Studies.
Skepticism abounds. "I think the Chinese are sort of chuckling, saying 'these guys really don't change,'" said Harry Broadman, former chief of staff of George H.W. Bush's Council of Economic Advisers. The new groupings could allow valuable information exchange, but "it doesn’t feel like there is any real negotiation going on," said Brad Setser, who served as deputy assistant secretary for international economic analysis at the Treasury Department during the Obama administration.
Cross your fingers. If Yellen and Raimondo's gamble pays off, the working groups could help "solve issues like intellectual property theft, national security concerns, and the increasing difficulty of doing business in the PRC," said Raja Krishnamoorthi, ranking member of the House Select Committee on China. The Biden administration pleads for patience. "We're just begun it, so I can't tell you it's been a roaring success yet … but the idea that we'd sit down together —and we had not been doing this for several years— is a very good one," U.S. Ambassador to China, Nicholas Burns, said during a National Committee on U.S.-China Relations event on Wednesday.
Talk shop peril. But the history of previous dialogues require U.S. officials "to demonstrate that the working groups are more than just talk shops," said Wendy Cutler, former acting Deputy U.S. Trade Representative in the Obama administration and current vice president of the Asia Society Policy Institute. That will require Commerce and Treasury officials "to focus on a limited number of 'low hanging fruit' outcomes and build out from there over time," Cutler said.
| U.S. Ambassador Nicholas Burns | Mandel Ngan/AFP via Getty Images |
'We're in a historic rivalry' says Biden's man in Beijing
Burns gave a frank assessment of the state of bilateral ties on Wednesday. "We have to think of the future as the United States and China sharing the planet and living with each other despite these enormous differences, while we compete," Burns said in an interview with National Committee on U.S.-China Relations President Steve Orlins.
Here are highlights of Burns' views, edited for length and clarity.
China as a Middle East peacemaker: It remains to be seen if China has the ability to be a true mediator, where you have to speak truth to both sides. This kind of real world practical diplomacy that the United States has practiced for a long time — you don’t really see the Chinese during that. So I think they’re a little bit more distant from these problems than we are.
Technological competition: Our most profound responsibility is to keep our most advanced technology out of the hands of the People’s Liberation Army. That’s the kind of thing we’re shutting down. Technology has become the heart of the competition between our two countries. Because not only does it have a commercial impact — which economy is going to be dominant — but a military impact. We have a sacred obligation to make sure that the United States military remains the No. 1 military in the Indo-Pacific. It is in no way possible for us to allow the Chinese to overtake us in military power and the science and technology issues are at the heart of that competition.
China's role in the U.S. opioid overdose epidemic: The Chinese have refused to have a sustained conversation with us for how we can work to prevent Chinese companies from exporting precursor chemicals to the drug cartels in Mexico. Ninety percent of the precursor chemicals that the drug cartels use come from China. China has a responsibility to stop the flow of precursor chemicals to the drug cartels. Senator Schumer spoke about this publicly this week and we raised this with President Xi Jinping at some length and in some degree of detail.
Prospects for a Biden-Xi meeting at APEC in November: President [Joe] Biden has spoken several times publicly over the last several months, saying he hopes that there will at some point be a meeting with President Xi Jinping. But no such meeting has yet been worked out. That’s for the White House to announce when that is set up.
TRANSLATING WASHINGTON
— WANG YI IN DC NEXT WEEK: Chinese Foreign Minister Wang Yi will come to the U.S. next week, Orlins said on Wednesday. Orlins — who enjoys close ties with Chinese government officials — made that statement in Beijing during his live-streamed discussion with Burns. The ambassador to China didn't comment on Orlins' assertion, but said later that "there’ll be other Chinese ministerial visits to Washington," without elaborating. Orlins' disclosure matches POLITICO reporting from last month of a meeting between Wang and Secretary of State Antony Blinken by the end of October.
— SOUTHCOM: BEWARE CHINA-ARGENTINA SPACE ANTENNA: An Argentina-based super-antenna capable of tracking satellites and operated by elements of China's People's Liberation Army poses a potential security threat to the U.S., warns commander of the U.S. Southern Command, Gen. Laura J. Richardson. Beijing can use the facility to "track U.S.satellites, partner nation satellites, and possibly be used for targeting of those satellites eventually," Richardson said at a Foundation for Defense of Democracies event on Wednesday. Argentina has denied any Chinese military activities at the site while Beijing has dismissed such concerns as "U.S. rumor mongering."
— NAVAL OFFICER ADMITS TO CHINA SPYING: U.S. Navy Petty Officer Wenheng Zhao has pleaded guilty to spying for China. Zhao "admitted he engaged in a corrupt scheme to collect and transmit sensitive U.S. military information" to a Chinese intelligence operative, the Department of Justice said in a statement on Tuesday. Zhao faces up to 20 years in prison if convicted. The Chinese embassy in Washington declined to comment.
— KERRY DIALOGUES-ON WITH XIE ZHENHUA: Biden's climate envoy John Kerry is quietly continuing his engagement with his Chinese counterpart, Xie Zhenhua, following his trip to Beijing in July. The two envoys "discussed key topics for @COP28_UAE and practical cooperation areas," during a video conference on Monday, China's ambassador to the U.S., Xie Feng, said in a post on the X social media platform on Tuesday. Kerry's office didn't respond to a request for comment.
TRANSLATING EUROPE
EU TOP DIPLOMAT BEGINS CHINA TRIP TODAY: The EU's foreign policy chief Josep Borrell arrives in Shanghai today, amid increasing tension between Beijing and Brussels. Speaking to China Watcher ahead of his departure, Borrell called on China to fix deepening trade tensions.
"Every day the EU and China trade goods worth €2.3 billion. However, our trade deficit has doubled in the last two years," Borrell said. "We need to level the playing field. China is aware of the areas where we perceive unfair treatment of our firms, and where we see recent domestic legislation as a deterrent to investors. He added that it's "no secret" that the EU and China have "significant political and economic differences," adding: "The real challenge before us is how best to make our relations work and how to manage our differences. We do not shy away from addressing them."
China says it looks forward to Borrell: The tone from the Chinese government is markedly more positive. The Chinese Foreign Ministry said on Wednesday that his visit "is conducive to the healthy and stable development of China-EU relations," state media Global Times reported.
FINLAND 'WATCHING' BEIJING-MOSCOW TIES: Finnish Defense Minister Antti Häkkänen said there's much attention in Helsinki about the growing relationship between China and Russia. Speaking to Stuart on the sidelines of the ongoing NATO ministerial meeting in Brussels, he said: "We have seen the friendship and the communication between Putin and Xi. … We are watching this very closely."
He added: "We Western countries have thought in the last 30 years that this globalization period is only wonderful and we are having only the benefits, to interconnect our countries [between the] West and Russia, China, Iran. … We now have to watch closely all those unplugged holes."
EU, U.S. JOIN HANDS AGAINST CHINESE STEEL AND ALUMINUM: Brussels and Washington plan to team up to create a joint tariff zone that will impose duties on steel and aluminum imports from non-market economies — the EU's euphemism for China — according to a European Commission proposal seen by Camille Gijs and Sarah Anne Aarup. Under the proposed interim deal, dated Oct. 3, the U.S. and the EU agree to impose a 25 percent tariff for steel, and 10 percent for aluminum from China. This comes a week ahead of the EU-U.S. Summit, where Ursula von der Leyen and Charles Michel, presidents of the European Commission and European Council, will meet Biden. However, U.S. Trade Representative Katherine Tai cautioned that it could be "very, very difficult for Brussels on an emotional level" to accept Washington's style of trade policies, Gavin Bade reports for pro subscribers in the U.S. and in Europe.
EU'S EV PROBE EXTENDED FOR 48 HOURS: The European Commission has extended a deadline for two days for carmakers to come forward in its anti-subsidy investigation into electric vehicles made in China, senior industry representatives granted anonymity to discuss non-public documents told Camille and Josh Posaner. Electric vehicle exporters based in China, including European companies, were to have submitted a so-called sampling questionnaire by Wednesday.
HOT FROM THE CHINA WATCHERSPHERE
— BEIJING FREES JAILED AUSTRALIAN JOURNALIST: The Australian journalist Cheng Lei ended three years behind bars on Monday for alleged violations of the country's national security laws. Chinese authorities "deported" Cheng back to Australia after completion of her sentence, Chinese Foreign Ministry spokesperson Wang Wenbin said Wednesday. A Beijing court tried Cheng behind closed doors in 2022 and never released the verdict. Cheng's arrest and prosecution reflected China's "absolute disregard for press freedom and the rule of law," the nonprofit advocacy group Reporters Without Borders said in a statement in August.
— THE DISPLEASURE ABOUT THE SIERRA MADRE: Beijing and Manila are waging a fresh war of words over China's unlawful claims to Philippine waters in the South China Sea. The flashpoint — again — was the Ayungin Shoal (also known as the Second Thomas Shoal) defended by the grounded Philippine naval vessel Sierra Madre. "It's very far. So, how can they exercise sovereignty?" Philippine military spokesperson Col. Medel Aguilar said on Saturday of China's claim. Beijing responded with a furious screed on Monday demanding that Philippine authorities "tow away the 'grounded' military vessel."
— POLICE PROBE CHINESE CONSULATE CAR ATTACK: Police are investigating an apparent deliberate attack on the Chinese consulate in San Francisco on Monday. Police shot dead an unidentified individual who crashed his car at high speed into the consulate's entranceway. Beijing wants "a speedy investigation and effective steps from the U.S. to ensure the safety of Chinese diplomatic missions and personnel," Wang at the Chinese Foreign Ministry said on Tuesday.
— HALEY SLAMS CHINA'S U.N. RIGHTS 'SHAM': China won reelection to a sixth consecutive term on the United Nations Human Rights Council on Tuesday despite Beijing's record of using the platform to stifle probes of Chinese rights abuses. "The UNHRC is a sham. It is not worthy of its name," former U.S. Ambassador — and GOP presidential candidate — Nikki Haley responded on the X social media platform on Tuesday. "We have made historic progress in our human rights cause," the Chinese Foreign Ministry's Wang said on Wednesday of China's return to the council.
**G7 creates the world's first Artificial Intelligence code of conduct, affecting policies revolving AI development. Stay updated on the developments with POLITICO Pro Technology. Sign up for a demo, here.**
HEADLINES
ProPublica: How a Chinese American gangster transformed money laundering for drug cartels
New York Times: How aligning With China changed life in the Solomon Islands
The New Yorker: The Uyghurs forced to process the world's fish
HEADS UP
— HERE COMES THE BRI FORUM: China's Belt and Road Initiative Forum, a tenth anniversary celebration for Xi Jinping's signature global infrastructure development program, will unfold in Beijing next Tuesday and Wednesday. Chinese state media is boasting that representatives from 130 countries will attend, but China's Foreign Ministry declined to confirm reports that Russian President Vladimir Putin will also join the celebration. Stay tuned.
ONE BOOK, THREE QUESTIONS
| Megamix/DigitalVision Vectors/Getty Images |
The Book: The Chinese Corporate Ecosystem
The Author: Colin S.C. Hawes is an associate law professor at the University of Technology Sydney.
Responses have been edited for length and clarity.
What was the most surprising thing you learned while writing this book?
We think of the Chinese Communist Party and government as a tightly controlled pyramid with Xi Jinping at the top. In practice the CCP finds it extremely difficult to exert control over its own officials and private or state corporations.
Instead of a pyramid, it's a swirling maelstrom of competing corporate and political interests where influence emerges from many different directions, and forces like corruption, personal networks and self-interest create corporate-political ecosystems that subvert or re-channel the CCP's attempts to govern at every level.
What was the most surprising thing you learned while writing this book?
How large corporations in China work with local governments and "friendly" regulators to get their own way and ignore CCP policies for their own interests. Several hundred illegal coal-fired power stations have been constructed all over China since 2005, even though most of them are not even necessary, and it directly contradicts the CCP's environmental protection policies. It's a colossal waste, but it allows local governments to massage their economic growth figures and share construction contracts with their cronies.
How should your book inform U.S. policymakers about the potential threat of Chinese firms operating as proxies of the CCP?
If the CCP cannot consistently control large corporations within China, or even its own Party members, it's even less likely that they can do so when those corporations come overseas. Private corporations like Huawei benefit the CCP when they build internet and telecom networks in China, or in developing nations overseas. They indirectly serve a diplomatic role, improving relations with nations that can supply China's massive resource needs.
The problem comes when the U.S. and allies base their policies on propaganda and fear rather than facts. I traced the distortion of original sources about Huawei by U.S. think tanks and congressional investigations desperate to make Huawei seem like a military or CCP-controlled company, when it is clearly employee-owned. After these errors were pointed out, U.S. policymakers reverted to a "potential threat" test: In other words, even if Huawei is a private firm, the CCP "could" order it to help "subvert" U.S. interests based on requirements of China's National Intelligence Law.
Got a book to recommend? Tell me about it at [email protected].
Thanks to: Heidi Vogt, Emma Anderson, Andrew Zhang, Nahal Toosi, Josh Posaner, Camille Gijs, Sarah Anne Aarup, Gavin Bade and digital producers Tara Gnewikow and Fiona Lally. Do you have tips? Chinese-language stories we might have missed? Would you like to contribute to China Watcher or comment on this week's items? Email us at [email protected] and [email protected].
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