Carbon Peak & Neutrality Commentary - FDI in China - Gao Feng on Phase-I Deal - My 3Fs Framework for Indo-Pacific
Here are the stories and pieces that I found noteworthy from the Friday, February 11, 2022, edition of the People’s Daily.
In today’s edition of the tracker, for those interested, I am also sharing the full text of my remarks at the launch of the new Indo-Pacific Circle initiative. I talked about my 3Fs framework to understand the emergence of the Indo-Pacific as a strategic theatre.
Page 1: There’s very little news on the front page today. There are two feature pieces from the series of grassroots reports linked to the Spring Festival. If you recall, on February 1, there was a report about the New Year media campaign, which I had covered. That piece had told us about the teams of reporters deployed and the focus on providing positive coverage of developments at the grassroots level.
Next, there’s a report (English report) about Xi Jinping sending a message of condolence to Erdogan after the latter tested positive for COVID-19.
Then there’s a piece on the Chinese economy, FDI and foreign companies in China. It informs that FDI inflow was at RMB 1.1.4 trillion. Some interesting data points from the piece:
FDI in the service sector was RMB 906.49 billion, a year-on-year increase of 16.7%.
FDI in the high-tech industry increased by 17.1% year-on-year, of which FDI in the high-tech manufacturing industry increased by 10.7% and FDI in the high-tech service industry increased by 19.2%. - There is no absolute figure given, however.
FDI from BRI partners and ASEAN countries increased by 29.4% and 29%, respectively.
FDI in eastern, central and western regions grew by 14.6%, 20.5% and 14.2% year on year.
in the past five years, Samsung has invested more than $20 billion in China
Shanghai received FDI worth $22.55 billion, an increase of 11.5% year-on-year, 60 new regional headquarters of multinational companies were set up in the city. There are not a total of 831 such headquarters.
25 new foreign R&D centers were set up in Shanghai, with the total now being 506.
According to a recent questionnaire survey by the Ministry of Commerce, 94.9% of the more than 3,000 key foreign-funded enterprises are generally optimistic about their future business prospects in China
The piece also quotes Chen Chunjiang, director of the Commerce Ministry’s department of foreign investment administration, as saying that “reports from major foreign chambers of commerce show that China is still one of the main investment destinations for multinational companies. The 2021-2022 business confidence survey report released by the German Chamber of Commerce in China shows that German companies in China are confident in the growth of the Chinese market, and 71% of them plan to continue to increase investment in China.”
Page 2: Just one report to note. First, a report informing that from January to December 2021, a total of 7.49 trillion yuan worth of local government bonds were issued nationwide. Around 2.57 trillion yuan of these were in general bonds and 4.92 trillion yuan in special bonds. The term of those bonds averaged 11.9 years, with an interest rate of 3.36 percent. As of the end of December 2021, the national debt balance of local governments was 30.47 trillion yuan (about $4.79 trillion). This is below the upper limit of nearly 33.28 trillion yuan set by the NPC.
Page 3: First let’s take a look at a report based on comments by the Ministry of Commerce spokesman Gao Feng on the US-China Phase-1 trade deal, with China calling for removal of tariffs. This English report captures Gao’s comments:
“China has worked hard to promote the joint implementation of its phase-one economic and trade agreement with the United States since the deal came into force. It overcame multiple negative impacts of the COVID-19 pandemic, a global economic recession, and disrupted supply chains, Gao Feng, spokesperson of the Ministry of Commerce, told a press conference. Gao called for action from the United States to create a conducive atmosphere and sound conditions for the two sides to expand trade cooperation. He added that the economic and trade teams of the two sides are in regular communication. China and the United States signed the agreement in January 2020 after nearly two years of negotiations. The United States pledged to cancel some of its additional tariffs on Chinese products. The agreement ranges from expanding bilateral trade in such sectors as agricultural products, manufactured goods, energy, and service, further broadening market access, to enhancing the protection of intellectual property rights. Gao stressed the deal benefits both sides and the world.”
If you are looking for good analysis on the Phase 1 deal, then do check this out below:
Anyway, Gao also said this:
“‘There is a view that the success of China’s economy is mainly due to government intervention. We oppose this view’. Gao said that the past 40 years and more have shown that China’s economic success is a result of the reform and opening-up policy and the effective combination of the role of market mechanism and government. China’s reform and opening-up has not only boosted China’s economic development, but also contributed significantly to world economic prosperity.” “有一种观点认为，中国经济取得的成功，主要靠政府干预。我们反对这样的看法。”高峰说，过去40多年的事实表明，中国经济的成功，是改革开放政策的成功，也是发挥市场机制作用和发挥政府作用有效结合的成功。中国的改革开放不仅促进了中国经济发展，也为世界经济繁荣作出重要贡献.
Second, there’s a feature piece on the use of the Beidou satellite navigation system by African countries for purposes like smart agriculture, land surveying and mapping, and meteorological monitoring.
Page 5: Today’s commentary drawing from CEWC focuses on the goals of carbon peak and neutrality. It argues that “achieving carbon peak and neutrality is a complex and a long-term task. It is impossible to accomplish everything at once. It is important to be firm in our goal and make progress while being steady in our strategy.” 实现碳达峰碳中和，是一项复杂工程和长期任务，不可能毕其功于一役，目标上要坚定不移，策略上要稳中求进.
The piece says that these goals are inherent to the idea of high-quality development. It adds that “in the long run, the organic integration of economic and social green transformation and high-quality development will make traditional industries high-end, intelligent and green, promote the optimization and upgrading of the whole industrial chain, promote the transformation of the quality, efficiency and driving force of China's economic development, and thereby create new advantages for China to participate in international cooperation and competition.” 长远来看，经济社会绿色转型和高质量发展进一步有机融合，必将推动传统产业高端化、智能化、绿色化，推动全产业链优化升级，推动我国经济发展质量变革、效率变革、动力变革，从而塑造我国参与国际合作和竞争新优势.
The next paragraph reiterates that achieving the goals of carbon peak and neutrality are long-term, complex tasks. “This requires us to be firm in our goal and make progress while being steady in our strategy. In reality, some places engage in ‘carbon charge’ 碳冲锋, some engage in ‘one-size-fits-all’ 一刀切, campaign-style ‘carbon reduction’ 运动式减碳. These are not in line with the requirements of the Party Central Committee, and must be corrected in a timely manner. From an awareness level, to achieve carbon peak and neutrality, we must coordinate the two major issues of development and security, deal with the relationship between development and emission reduction, overall and local, short-term and medium- to long-term, and adhere to the principles of national coordination, conservation first, two-wheel drive, internal and external smoothness, and risk prevention. From a practical point of view, we should take full account of the domestic energy structure, industrial structure and other basic national conditions, make overall plans, establish first and then break down, and not affect the overall economic and social development; the gradual withdrawal of traditional energy sources should be based on the safe and reliable substitution of new energy sources. Achieving carbon neutrality is a big test, which requires a correct view of performance…” In saying so, the piece emphasises: “功成不必在我” “功成必定有我” - “Gōng chéng bùbì zài wǒ” “gōng chéng bìdìng yǒu wǒ” - Or “success does not have to be with me” and “success must be with me.” – 现实中，有的地方搞“碳冲锋”，有的搞“一刀切”、运动式“减碳”，这些都不符合党中央的要求，必须及时纠正。从认识层面出发，实现碳达峰碳中和必须统筹好发展和安全两件大事，处理好发展和减排、整体和局部、短期和中长期的关系，坚持全国统筹、节约优先、双轮驱动、内外畅通、防范风险的原则。从实践角度出发，要充分考虑国内能源结构、产业结构等基本国情，通盘谋划，先立后破，不能影响经济社会发展全局，确保传统能源逐步退出要建立在新能源安全可靠的替代基础上。实现碳达峰碳中和是一次大考，需要正确的政绩观，需要“功成不必在我”“功成必定有我”，坚持稳中求进，逐步实现。
I did some reading on these last two phrases about success. They are adaptations from Hu Shi’s speech at the graduation ceremony of Peking University in 1932. The first is supposed to reflect a sense of selfless dedication that cadres must have towards doing things that are in the interest of overall national development; and the second is about emphasising a sense of mission and responsibility that cadres must have without worrying about fame or personal gain.
The next paragraph says that on one hand, basing ourselves on the basic national conditions, where coal is the dominant source of energy, we should do a good job to make clean and efficient use of coal, increase our capacity to absorb new energy, optimise the mix of coal and new energy, and make breakthroughs in green and low-carbon technologies. On the other hand, we need to conduct scientific assessments so that newly-added renewable energy and energy consumption of raw materials are excluded from total energy consumption controls, create conditions for an early shift from dual controls on energy consumption to dual controls on total carbon emissions and intensity, and accelerate the formation of incentive and constraint mechanisms for reducing pollution and carbon emissions…at the same time, we need to ensure energy supply. Large enterprises, especially state-owned enterprises, need to take the lead in ensuring stable energy supply and prices and speed up efforts to build China into an energy powerhouse. 一方面，要立足以煤为主的基本国情，抓好煤炭清洁高效利用，增加新能源消纳能力，推动煤炭和新能源优化组合，狠抓绿色低碳技术攻关。另一方面，要科学考核，新增可再生能源和原料用能不纳入能源消费总量控制，创造条件尽早实现能耗“双控”向碳排放总量和强度“双控”转变，加快形成减污降碳的激励约束机制，防止简单层层分解。与此同时，也要确保能源供应，大企业特别是国有企业要带头保供稳价，加快建设能源强国。
Along with the commentary, do note this report by China Daily:
“A statement jointly released by the National Energy Administration and the National Development and Reform Commission on Thursday said China will come up with an integrated institution and policy system for low-carbon energy development by 2030, when the country's non-fossil fuels will play an important role in ensuring a steady domestic energy supply. China will by then come up with a series of policies, standards and supervising systems, and continuously push forward the country's green energy transition under the condition of domestic energy security, it said. Chinese authorities also emphasized the importance of speeding up construction of large-scale wind and solar power bases in the country's deserts to push forward construction of a greener energy supply system with clean and low carbon energy as the mainstay. The government will continue optimizing the energy mix via furthering the use of wind and solar in more arid areas while upgrading and reconstructing existing coal-fired power generation units. It will also facilitate new energy power transmission to ensure that clean energy is not wasted.”
Other Stories:
A report (English report) with data from the Taiwan Affairs Office:
According to official statistics, the trade volume between the mainland and Taiwan rose to over 328.3 billion U.S. dollars in 2021, more than doubling the figure for 2011. The mainland still remains Taiwan's largest export market and source of trade surplus. The total amount of Taiwan-invested business projects on the mainland reached 123,781 by the end of 2021, with over 71.3 billion U.S. dollars in actual investment. In stark contrast, the amount of investment in Taiwan by mainland businesses stood at around 3.7 billion U.S. dollars by the end of last year.
Also, this is not in PD, but a useful story in light of China, the US and Europe’s semiconductor sector development policies.
“Roger Sheng, vice-president of research at US market research company Gartner, said that as the world's largest chip market, China's semiconductor industry has made progress in recent years. In 2021, the sales revenue of China's integrated circuit industry exceeded 1 trillion yuan ($157.3 billion) for the first time, with year-on-year growth of 18 percent, according to estimates by the China Semiconductor Industry Association. In comparison, global semiconductor revenue grew at a compound annual growth rate of 25.6 percent to $552.9 billion last year. But there is still a big technical gap between Chinese chipmakers and their foreign peers, especially in high-end chipmaking equipment and fundamental chip materials, Sheng said. China, for instance, relies heavily on imports for lithography machines that play a crucial role in chip production. To achieve breakthrough in these areas, money is not enough. "Talent and time are the keys,” Sheng added. Fang Xingdong, an independent expert who has been following the semiconductor industry for more than two decades, said the sector in China now faces increasingly fierce competition, as well as technological restrictions from the US government.”
A 3Fs Framework for the Indo-Pacific
by Manoj Kewalramani
I’d like to begin by thanking everyone behind this initiative. I think the Indo-Pacific Circle has the potential to become a critical platform, bringing together some of the best minds not just from India, but across the region to discuss the pressing issues of our times and deliberate policy choices…
I look forward to engaging with and learning from the mentors and scholars that are part of this network.
That said, I’d like to limit my initial comments to talk about my understanding of the Indo-Pacific as a strategic concept and theatre, while saving my views for the specific aspects of Indian policy for the discussion later.
I’ve encapsulated my understanding of the Indo-Pacific in a 3Fs framework: These are Fluidity, Form and Function.
The first F is Fluidity This refers to the idea that we are living in a moment when the world is undergoing a transition between orders. And developments in the Indo-Pacific region will have a deep influence on the future architecture of world order.
This is because of three primary reasons:
The emergence of the Indo-Pacific as a strategic concept is partly a product of the shifting gravity of global economic power. The Indo-Pacific region stretches from the western shores of the United States to western Africa. It is home to 65% percent of the world’s population and accounts for over 60% of global GDP and 46% of the world’s merchandise trade. Also, the Indian Ocean is a strategic waterway, connecting the natural resources-rich regions of Africa and West Asia to the labour, capital, and consumer markets across the Indian subcontinent and East Asia. It is, therefore, unsurprising that the Indo-Pacific region is a hub for key supply chains. Paradoxically, these interlinkages have of late also coincided with the currents of disruption and de-globalization, and the deepening politicisation and securitisation of trading ties and technology ecosystems.
The rise of China: The Chinese economy is central to the trade and technology ecosystems of the Indo-Pacific. This over the years made Beijing a critical economic partner for most countries. However, the assertive and revisionist turn in Chinese foreign policy, its use of economic tools for political ends, along with Beijing’s increased risk-tolerance in its exercise of power has forced new thinking for states in the region. From an Indian perspective, this is critical given that over the past decade, Chinese policy towards India has shifted from being unaccommodative of India’s rise to increasingly being hostile and adversarial.
Realignment of American policy: Finally, US foreign policy has undergone a gradual reassessment over the past decade. From the Obama administration’s Pivot to Asia to the Trump and subsequently Biden administration’s approaches to the Indo-Pacific, there appears to have been a recalibration of America’s interests and commitments abroad. This is a dynamic process, and it appears to be accompanied by a deeper rethinking about the nature of American power and the role of allies and partners in achieving foreign policy objectives, particularly when faced with what seems to be a competition of systems.
To me, these three factors weigh heavily on the minds of policymakers and analysts around the region.
What further adds to the fluidity is the fact that both the US and China are limited by their own resources, capacities and domestic politics in shaping a new world order. At the same time, there is some uncertainty about the evolution of US-China ties. While competition appears to be the dominant prism, I think it’s worth keeping in mind Secretary Blinken’s framing of the approach to relationship with China being to be “competitive where it should be, collaborative where it can be, adversarial where it must be.”
The consequence of this fluidity is that there are new partnerships emerging in the Indo-Pacific. However, unlike the past, where ***Form*** was critical — in that states would come together to establish formal institutions, with clearly-defined architectures, membership criteria, terms of engagement and responsibilities — partnerships at present are driven more by ***Function***. This is in part a product of the inability of old structures to adapt and address the issues in the region, and in part owing to the three factors that I mentioned earlier.
The actors in the region today are, therefore, seeking to leverage opportunities to strike new bargains, to build resilience, address challenges, leverage opportunities and maximise their interests, while trying to minimise costs. In order to do so, they are prioritising Function over Form.
This is evident in the new minilateral arrangements, or issue-based coalitions, that are mushrooming around in the region. These arrangements are essentially bringing together actors who have a commonality of purpose – or who are like-minded - to work together with few organisational constraints in order to arrive at common approaches towards a policy issue. This is an intensive process. Commonality of purpose does not necessarily imply easy agreements on approaches and policies. There are often differences in specific interests that must be harmonised.
Also, it is worth noting that while such functionally-driven mechanisms can be extremely useful in avoiding the limitations of formal institutions, what makes them so powerful, i.e., that they are purpose driven and can allow actors to preserve their autonomy of action in other domains - is also what can limit their effectiveness. There will be tough choices and trade-offs that states already are having to and will have to make in the future. The key, therefore, will lie in ensuring that political trust is preserved and deepened.
There are many ingredients that go into building this trust, but I’d like to end by highlighting three that I believe are critical:
First, that there is an appreciation of and congruence on matters of strategic interests
Second, that there is demonstrated mutual support for each other’s security interests
Third, that there is a shared understanding that economic interdependence is mutually beneficial
With this, I’d like to end my initial remarks. Thank you very much.