Feng Zhongping on NATO & Asia-Pacific - Li: 'Recovery at Critical Point' - Wang Yi meets Jaishankar & Lavrov - Wang's 3 Concerns on Ukraine War - Boosting Auto Consumption
Dear subscribers,
Before I get to today’s edition, I have an announcement. I am really excited to share information about a new course that I've designed and will be conducting starting from August 2022.
Watching China: Open Source Analysis of Chinese Politics & Policymaking is a 6-week course that aims to teach frameworks, skills and tools that I think are essential for open source Chinese politics and policy analysis. All the details about the course are here: https://school.takshashila.org.in/scc/scc-watching-china
The course is something I’ve been thinking about for a while after my conversation with Jordan Schneider on the China Talk podcast late last year. If you do find it worthwhile, please sign up and/or share within your networks.
Here are the stories and pieces that I found noteworthy in the Friday, July 8, 2022, edition of the People’s Daily
.Page 1: At the top of the page is a report (English report) with data from the Ministry of Commerce on China’s services trade. It says that in the first five months of the year, services trade value grew 22 percent year on year to 2.365 trillion yuan (about 352.98 billion U.S. dollars). Service exports expanded 26.3 percent year on year to 1.15 trillion yuan, and service imports were 1.21 trillion yuan, up 18.2 percent from a year ago.
China’s trade of knowledge-intensive services rose 10 percent year on year to about 988.67 billion yuan. Sectors such as telecommunications and information services and other business services saw rapid increases in exports, increasing by 18.5% and 13.2%, respectively. Insurance services were among the fastest growing areas in imports, with a growth rate of 74.2%. Tourism service trade expanded 7.7 percent from a year ago to 330.84 billion yuan in the first five months.
Next, there’s a longish report emphasising the importance of policies to stabilise growth by strengthening infrastructure and expanding demand. However, there don’t seem to be any demand side stimulation measures at all mentioned in the article. The piece says that there has been progress in key projects. For instance, it talks about the work being done under the China National Offshore Oil Corporation (CNOOC) Yancheng “green energy port” project. This will be China’s largest LNG storage facility. The article talks about the Hotan–Ruoqiang railway being open to traffic now; it mentions work on the Sichuan-Tibet Railway, water conservancy projects, airport upgrades in Guangzhou and Shenzhen, solar power projects in the Gobi desert, etc.
In terms of new infrastructure, the piece talks about the beginning of the project to construct eight national computing hubs and 10 national data center clusters. 25 new projects have been launched in the 10 national data center clusters so far. China's investment in big data centers is expected to grow by more than 20 percent annually during the 14th Five-Year Plan period, the report says, quoting Sun Wei, deputy director of the Department of Innovation and High-Tech Development at the NDRC.
The third sort of projects that the piece talks about are public facilities, which includes childcare, elderly care, affordable housing, renovation of old urban communities, drainage systems, etc.
The piece later informs that this year’s local government bond quota was set at 3.65 trillion yuan; the entire quota for project construction has already been issued. 今年地方政府专项债券规模为3.65万亿元，用于项目建设的额度已全部下达，项目资金保障充足. At this point, I am going to digress with some additional information.
SCMP reported earlier this week that:
“Local governments sold a record 1.94 trillion yuan (US$289 billion) worth of bonds last month, representing a year on year increase of 143.27 per cent, according to Great Wall Securities, as China once again turned to its old playbook of driving up growth through public investment. This topped the previous record of 1.3 trillion in May 2020…According to the latest official figures from the Ministry of Finance, China issued 1.21 trillion yuan of local government bonds in May, taking the total for the first five months of the year to 3.32 trillion yuan…Special purpose bonds, which are used to fund infrastructure spending, made up 71 per cent of the total bond issuance, making it the key driver of the record public debt growth last month, according to Great Wall Securities. In the first six months of the year, 93 per cent of the 3.65 trillion special purpose bond quota had been issued, totalling 3.41 trillion yuan, according to the securities firm.”
Also, Bloomberg reported this week that:
“China’s Ministry of Finance is considering allowing local governments to sell 1.5 trillion yuan ($220 billion) of special bonds in the second half of this year, an unprecedented acceleration of infrastructure funding aimed at shoring up the country’s beleaguered economy. The bond sales would be brought forward from next year’s quota, according to people familiar with the discussions, who asked not to be identified because they aren’t authorized to speak publicly. It would mark the first time the issuance has been fast-tracked in this way, underscoring growing concerns in Beijing over the dire state of the world’s second-largest economy. Previously local governments didn’t start selling the debt until Jan. 1, when the new budget year begins. The proposal to adjust that timeline would therefore need to be reviewed by the State Council and might also need approval from the country’s legislative body, the National People’s Congress.”
Useful explanation from the report on why this would be unprecedented:
“Each year local governments receive a quota for how many general and special bonds they can sell. Until 2018 provinces and cities would wait for the NPC meeting in March to officially approve that quota before they started selling the bonds, meaning the money wouldn’t be spent until much later in the year. From 2019 onwards, the central government began issuing the quotas earlier so local authorities could start selling the debt as soon as possible after the new year began. In December last year, the Ministry of Finance said it had already issued almost 1.5 trillion yuan worth of 2022’s quotas, and then pushed for all 3.65 trillion yuan worth of bonds to be sold quickly and used this year. By the end of June, most of those bonds were sold, meaning there’s space in the second half of the year to sell more debt if the government wants to. In 2018, the NPC allowed the State Council to start granting some of the following year’s bond quotas early but didn’t mention the timing of sales. That means allowing the use of 2023’s quota this year may need the approval of the NPC first, possibly at one of the regular meetings of its standing committee.”
Finally, Reuters reports that China will set up a state infrastructure investment fund worth 500 billion yuan ($74.69 billion) to spur infrastructure spending and revive a flagging economy, two people with knowledge of the matter told the agency. The fund is expected to be set up in the third quarter, the sources said.
Anyway, back to PD. There’s a report on Li Keqiang’s comments at a symposium with leading officials of five coastal provincial regions, Fujian, Shanghai, Jiangsu, Zhejiang and Guangdong. Li said that “China's economic operation has been through an unusual journey since the start of this year…the foundation for recovery is still unstable and arduous efforts will be required to stabilise the economy. Development is the foundation and key to solve all problems in China. Under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, we must fully implement the new development concept, efficiently coordinate epidemic prevention and control and economic and social development, give full play to the initiative of the central and local governments, coordinate the implementation of macro policies and deepen reforms, help market players recover and enhance their vitality, and strive to stabilise employment and prices, so as to keep the economy running within a reasonable range.”
Li added that “China's economic recovery is at a critical point now. The five provinces and cities along the southeast coast account for more than one-third of the country’s economic volume, nearly 40% of fiscal revenue, and nearly 80% of the local governments’ net contribution to the central government, which supports the national financial resources and the central government’s transfer payments to the central and western regions.” “It is necessary to continue to take the lead in national development and economic stability, and play a major role in safeguarding national financial resources.” Making this point, he “urged efforts to further unclog bottlenecks in industrial and supply chains and steer the economy back on track as soon as possible, and thereby strive to stabilise growth and financial resources.” — Quick thought: That’s a very interesting message being sent; sounds like this is meant for folks at the central level who probably desire maintaining a stricter approach to COVID containment. 李克强说，当前正处于经济恢复的关键时间点。东南沿海5省市经济体量占全国1/3以上，财政收入占比近4成，在地方对中央财政净上缴中贡献近8成，有力支撑了国家财力和中央财政对中西部地区转移支付。要继续挑起国家发展、稳经济的大梁，发挥保障国家财力的主力作用。在做好疫情防控的同时，进一步打通产业链供应链堵点，推动经济运行尽快回归正常轨道，努力稳增长稳财源.
Xinhua English summarises the rest well:
“National policies aimed at helping enterprises should be implemented, and more supportive policies should be rolled out, the premier said. Highlighting continuous efforts to deepen reform, Li said the country should further streamline administration and delegate power, improve regulation and upgrade services, while continuing to improve the business environment and further stimulating market vitality and social creativity. Li also underlined the significance of opening-up to China's economic and social development, pledging to remain committed to expanding opening-up. China will continue to promote reform and development through opening-up, stabilize foreign trade and foreign investment, and better participate in international competition and cooperation through high-level opening-up, Li said.”
Fourth, a report about Wang Huning speaking at a ceremony in Beijing on Thursday to mark the 85th anniversary of the beginning of the “resistance war against Japanese aggression.” Sun Chunlan, Huang Kunming, Hao Mingjin, Zhang Qingli and Miao Hua attended the ceremony. Cai Qi presided over the ceremony. The article says that following the Lugou Bridge Incident, the CPC called for a united front with the Kuomintang and “became the mainstay of the whole nation’s resistance against Japanese aggression.”
In his comments, Wang reportedly called for “inheriting and carrying forward” the great spirit of the war, unswervingly adhering to the leadership of the Communist Party of China, thoroughly studying and implement Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and deeply understanding the decisiveness of the Two Establishments, strengthening the four consciousnesses and four self-confidences, and achieving the two safeguards; he called for consolidating historical memory, undertaking the historical mission, and grasping the historical initiative in order to forge ahead better in the new journey and contribute to the new era…”We must unswervingly follow the path of peaceful development and make better contributions to the peaceful development and progress of mankind.” 王沪宁表示，我们纪念全民族抗战爆发85周年，就要传承和弘扬伟大抗战精神，坚定不移坚持中国共产党领导，深入学习贯彻习近平新时代中国特色社会主义思想，深刻领悟“两个确立”的决定性意义，增强“四个意识”、坚定“四个自信”、做到“两个维护”，筑牢历史记忆，担当历史使命，掌握历史主动，更好奋进新征程、建功新时代。要坚定不移加强中华儿女大团结，敢于斗争，善于创造，锲而不舍为实现中华民族伟大复兴而奋斗。要坚定不移走和平发展道路，更好为人类和平发展进步贡献力量.
There are more reports on the war anniversary on Page 4.
Next, a report (English report) informing us that the construction of a project linking China’s two mega water infrastructures — the Three Gorges project and the South-to-North Water Diversion Project — started on July 7, a new move to further transfer water to the country's dry north and improve its national water network. Vice-Premier Han Zheng, also a member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee and head of a leading group on high-quality follow-up development of the water diversion project, announced the start of the new project's construction at a meeting on the matter held via video link. Hu Chunhua presided over the meeting
Finally, a report (English report) with data from the Ministry of Education. It says that China now has 158 million students in 207,000 schools for the nine-year compulsory education. There are also 10.57 million teachers that are part of the compulsory education system. The compulsory-education retention rate reached 95.4 percent, up from 91.8 percent in 2012.
From 2012 to 2021, the average expenditure on primary school students increased from 7,447 yuan per student to 14,458 yuan per year, and the average expenditure for junior high school students increased from 10,218 yuan to 20,717 yuan per student per year. Also, over the decade, all-level governments have invested more than 1 trillion yuan (more than 149 billion U.S. dollars) to close the gap between urban and rural school conditions and ensure all compulsory education schools have internet access. Finally, a nutrition improvement program for rural students benefited 37 million children each year, helping the rate of relevant students passing the physical health tests increase from 70.3 percent in 2012 to 86.7 percent last year.
Page 2: A report on the State Council’s briefing on Thursday, which talked about the latest policies on promoting the consumption of automobiles. You can watch the briefing here, if you like. There’s more data in the PD report, but in the interest of time, here’s Bloomberg’s report on this:
“A briefing held by the State Council Information Office on Thursday underscored the importance of promoting sales of new-energy vehicles and ensuring the supply of auto chips and related raw materials with a relatively stable price. Efforts are also underway to expedite a study about extending purchase tax exemptions for electric cars, Guo Shougang, an official with the industry ministry, said…Authorities on Thursday also pledged to look at measures to facilitate the trade and circulation of used cars. Overall car ownership levels are still low in China versus developed markets like the US and Australia and the nation does not have a vibrant second-hand market place. Encouraging car sales in China’s vast rural areas was another area officials said would be examined.”
Page 3: First, let’s get to Wang Yi’s comments about the war in Ukraine. The report says that Wang expressed his views about the war in a conversation with Indian Foreign Minister S. Jaishankar in Bali, at the sidelines of the G20 meeting. Xinhua reports:
“Wang expounded on China's three concerns about the current situation in Ukraine.
First, Wang said, China opposes the act of taking the opportunity to incite Cold War thinking, hyping up bloc confrontation, and creating a ‘new Cold War.’ He said that in the face of complex and severe challenges, the world values unity rather than division, and what is needed is dialogue rather than confrontation. Wang stressed that China will continue to unswervingly stand on the right side of history and on the side of promoting peace talks.
Second, China opposes the practice of double standards that undermine China’s sovereignty and territorial integrity, he said. Some countries emphasize the principle of sovereignty on the Ukraine issue, but keep challenging China’s sovereignty and the one-China principle on the Taiwan question, and even deliberately create tensions in the Taiwan Strait, which is obviously a blatant double standard, he added. Wang said China rejects any attempt to equate the Ukraine crisis with the Taiwan question, noting that China will firmly defend its core interests.
Third, he said China opposes any act to undermine other countries' legitimate right to development. Some countries have used the Ukraine crisis as an excuse to abuse unilateral sanctions on China and other countries, which is neither justified nor legal, Wang said, adding that such actions undermine normal state-to-state exchanges, violate the prevailing rules of international trade, and lead to further complication and escalation of the Ukraine crisis. Wang said all parties should jointly resist those actions and strive to build an open, fair and non-discriminatory international cooperation environment.”
Quick thought: Essentially, Wang’s view on the Ukraine war is that China would like to see the conflict ease but is not going to do anything in particular to try and quicken that process. It has accepted that the conflict will continue. In the meantime, the real concern is that the US is leveraging the conflict to intensify containment, and that’s the real problem rather than the actual war launched by Putin.
It’s interesting that the Chinese report in PD focused on this bit in terms of the meeting with Jaishankar. There’s another Chinese readout of the meeting too, which is not in PD. Xinhua reports:
“China and India, Wang said, share common interests and similar legitimate claims. As the world is undergoing profound changes unseen in a century, major countries like China and India will definitely not go with the flow, but are destined to uphold strategic determination, achieve their respective development and revitalization in accordance with the established goals, and make greater contributions to the future of mankind. Wang said the two countries should take practical actions to implement the important consensus of the leaders of the two countries that "the two countries are not each other's threats, but cooperation partners and development opportunities." He also said the two countries should push for the early return of the bilateral relations to the right track and light up the bright future of the relations together. Wang said China appreciates India's support for its hosting BRICS meetings and the High-level Dialogue on Global Development in June, and it will support India's work in 2023 as the next rotating chair of the G20 countries and of the Shanghai Cooperation Organization (SCO). Noting that both countries, as advocates of multilateralism, share views in areas ranging from safeguarding peace and security, boosting economic recovery, improving global governance, to jointly combating COVID-19, Wang said they should strengthen coordination and cooperation, and join efforts to make international relations more democratic, international order fairer, the developing countries' voices to be heard more and their legitimate interests better maintained.”
In contrast, the Indian readout of the meeting does not mention Ukraine by name and largely focuses on the situation in Ladakh:
“EAM called for an early resolution of all the outstanding issues along the LAC in Eastern Ladakh. Recalling the disengagement achieved in some friction areas, EAM reiterated the need to sustain the momentum to complete disengagement from all the remaining areas to restore peace and tranquility in the border areas. He reaffirmed the importance of fully abiding by bilateral agreements and protocols, and the understandings reached between the two Ministers during their previous conversations. In this regard, both Ministers affirmed that the military and diplomatic officials of the two sides should continue maintaining regular contact and looked forward to the next round of Senior Commanders’ meeting at an early date. EAM reiterated that India-China relationship is best served by observing the three mutuals – mutual respect, mutual sensitivity and mutual interests. EAM recalled his meeting with H.E. Mr. Wang Yi in Delhi in March 2022 and reviewed the progress of some key issues discussed then, including the return of students. EAM stressed the need for expediting the process and facilitating the return of students on an early date. The two Ministers also exchanged perspectives on other regional and global developments. Foreign Minister H.E. Mr. Wang Yi appreciated India’s support during China’s BRICS Chairship this year and assured China’s support for India’s upcoming G20 and SCO Presidency. They agreed to remain in touch.” – Quick thought: I anyway think that disengagement is a step down from restoration of status quo, which is what India should be demanding. Now, the fact that de-escalation is also missing from this statement probably signals acceptance that the LAC will remain militarised for the foreseeable future.
Next, there’s a report on Xia Baolong, vice-chairman of the Chinese People's Political Consultative Conference (CPPCC) National Committee and president of the Chinese side of the China-Russia Friendship Committee for Peace and Development (CRFCPD), meeting with Boris Titov, Russian chairman of the CRFCPD. Xia was awarded the Russian Friendship Medal at this meeting. Also in PD, is a report about new ILD chief Liu Jianchao speaking to Boris Gryzlov, chairman of the Supreme Council of the United Russia party.
While on China-Russia ties, Wang Yi also met with Sergei Lavrov in Bali. It’s not in PD today, but Xinhua reports that Wang said that both sides had shown “strong resilience and strategic determination in bilateral ties.” The report adds:
“For his part, Lavrov said Russia and China have played an important role in safeguarding the United Nations Charter and international law, promoting a fairer international order and pushing for more democratic international relations by upholding responsible stances and maintaining strategic collaboration, which is recognized and supported by developing countries. The Russia-China relations, Lavrov said, are not subject to external interference and the practical cooperation between the two countries is advancing smoothly, with a great potential for further development. He added that Russia is ready to expand the area and scale of cooperation between the two countries, so as to better benefit the two peoples. Russia supports the important concepts put forward by China including the Global Development Initiative and the Global Security Initiative, and will strengthen coordination and cooperation with China, Lavrov said. Wang said it is the shared aspiration of developing countries to oppose hegemony, bullying and unilateralism. Facing the realities of the current international politics, will countries choose to pursue power politics and hegemony or promote the process toward a multi-polar world? Will they truly uphold international order with the United Nations at its core or follow rules made by a handful of countries according to their own standards? ‘As time goes by, more and more countries will have a clearer view of this and make the right choice,’ Wang said. China stands ready to work with all sides to implement the Global Security Initiative proposed by the Chinese leader and practice the vision of common, comprehensive, cooperative and sustainable security, Wang said. The two sides exchanged views on the Ukraine situation. Lavrov introduced the Russia-Ukraine situation and Russia's stance on and proposal for the issue. Wang said China will continue holding an objective and just position, focusing on de-escalating the situation and promoting peace talks, and supporting all efforts conducive to the peaceful settlement of the crisis.”
Page 6: A short report informing that the 14th Straits Forum will be held in Fujian from July 12
Page 10: First, a short report with information from immigration authorities, telling us that 1,461 criminal suspects obstructing national border management have been launched since the beginning of the 100-day crackdown operation. The crackdown has led to 735 criminal cases and smashed 21 criminal gangs.
Second, a report telling us that Zhang Yongze, former vice chairman of the government of Tibet Autonomous Region, has been expelled from the Party and dismissed from public office over serious violations of Party discipline and laws. Xinhua English has the details:
“The investigation into Zhang found that his view on job performance is seriously distorted and he failed to resolutely implement the Party's policies for the governance of Tibet in the new era. He had seriously damaged the political ecology of the region and unit where he worked, refused to cooperate in the investigation, and engaged in superstitious activities. Zhang took advantage of his positions to help others in project contracting and job adjustment and illegally accepted a vast amount of money and valuables in return. He has severely violated the Party's discipline and committed duty-related offences. He is also suspected of taking bribes, the top anti-graft body said.”
Page 16: On the international page, the lead piece is about racism in the US.
Then, there’s an article by Feng Zhongping, Director of Institute of European Studies at Chinese Academy of Social Sciences. He criticises the recent NATO summit, which invited participation from other Asian countries for the first time. He says that:
“The continuous expansion of NATO in Europe has led to the Ukraine crisis. Now, this military organisation is trying to further itself beyond the territory stipulated in its convention and provoke group confrontation in the Asia-Pacific region, which is bound to create greater risks to regional and global security.” 北约在欧洲的不断扩张已经酿成乌克兰危机，如今这个军事组织试图进一步突破其公约规定的地域，在亚太挑起集团对抗，势必会给地区和全球安全制造更大风险.
Feng adds that “NATO claims to be a defensive organisation, but it has repeatedly violated international law and wantonly waged war against sovereign countries.” The examples he cites are of the bombing of Yugoslavia, the war in Afghanistan and the bombing in Libya. “When NATO, led by the United States, launches wars abroad, it has often used the banner of ‘humanitarianism’, but its acts of war without exception have led to serious humanitarian disasters in other countries. 以美国为首的北约对外发动战争时，常常打着“人道主义”等旗号，但其战争行为却无一例外地给他国造成了严重的人道主义灾难.
He then says that the legitimacy of NATO's continued existence has repeatedly been questioned. In saying this, Feng quotes Macron’s 2019 comment about NATO experiencing “brain death,” saying that it revealed how “the bloc was incompatible with the trend of the times.” He then says that following that, NATO has “suddenly” again assumed a higher profile and expressed the intention to continue its external expansion. Feng says that while on the surface, this seems to be related to the “sudden change in the European security situation caused by the Ukraine crisis, but fundamentally, it is because the United States has intensified its demands from NATO and is more eager to use what is the world's largest military bloc in order to further its global strategy and maintain its hegemonic position.” 北约继续存在的合法性一直受到质疑。2019年底，法国总统马克龙公开指出，北约正在经历“脑死亡”，道出了这个军事集团与时代潮流格格不入的尴尬。仅仅两年多，北约却突然恢复高调，意图继续对外扩张，这表面上看与乌克兰危机导致欧洲安全局势骤变有关，但从根本上讲，是因为美国对北约的刚性需求上升，更加希望利用这个全球最大的军事集团推行其全球战略、维护其霸权地位.
The next paragraph focuses on China. He says that the US has begun identifying China as a “strategic competitor” in recent years. In addition, the current administration is more keen on wooing allies “when containing and suppressing China” and is also keen on leveraging NATO for this purpose.
“Since last year, NATO has escalated its hype about ‘China Challenge’ and sought to exert joint pressure on China, which is indicative of the strategic intention of the United States. During the NATO summit in Madrid, the United States also sought to promote a ‘convergence/confluence’ of the so-called alliance mechanism established by NATO and the United States in the Asia-Pacific region, in an attempt to replicate the template (套路复制) to incite group confrontation in the Asia-Pacific region. This further highlights the US’ strategic plot against China.” 近年来，美国将中国视为所谓“战略竞争对手”。相比上届美国政府，本届美国政府在遏制打压中国时更注重拉拢盟国，因此也更加看重北约的工具作用。去年以来，北约不断升级炒作“中国挑战”，试图对华搞联合施压，即反映了美国的战略意图。北约马德里峰会期间，美国还试图推动北约与美国在亚太地区建立的所谓同盟机制“合流”，想把煽动集团对抗的套路复制到亚太，更加凸显了其针对中国的战略图谋。
Feng then says that “NATO's Cold War mentality and long-term expansion confrontation in Europe are the root causes of the current security dilemma in Europe.” Pointing to the Ukraine war, he says that the “sanctions imposed by Europe and the United States on Russia have caused a huge impact on the economic and social development of European countries, and the people of all European countries are paying a huge price for it.” 乌克兰危机的爆发和延宕，以及欧美对俄实施的一轮又一轮制裁，给欧洲国家经济社会发展造成巨大冲击，欧洲各国人民正为此承受巨大代价. Feng adds that “the crisis in Ukraine has not yet subsided, and the United States has encouraged NATO to extend its tentacles to the Asia-Pacific region. This is bound to pose a threat to regional stability and development.” 乌克兰危机尚未平息，美国又鼓动北约将触角伸到亚太，势必给地区稳定发展制造威胁.