THE CHINA DEBRIEF JUNE-30-2022-ORIGINAL BRIEFING REVEALED

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U.S.-China Relations
Faced with a newly aggressive Russia, NATO leaders on Wednesday outlined a muscular new vision that names Moscow as the military alliance’s primary adversary but also, for the first time, declares China to be a strategic “challenge.” It was a fundamental shift for an alliance that was born in the Cold War but came to view a post-Soviet Russia as a potential ally, and did not focus on China at all. China offered a chilly response to the new NATO moves. “The deepening strategic partnership between the People’s Republic of China and the Russian Federation and their mutually reinforcing attempts to undercut the rules-based international order run counter to our values and interests,” NATO leaders said in a new mission statement issued during their summit in Madrid.
The United States has accused several companies and research institutes in China of supporting Russia’s military after the Ukraine invasion began, in one of the first concrete signs of Chinese entities allegedly helping Russia against Washington’s wishes. The Commerce Department said it was adding five of the companies to a trade blacklist known as the Entity List as punishment. It also accused two Chinese research institutes already on the blacklist since 2018 of supporting Russia’s military in recent weeks. Entities added to the list are effectively blocked from buying U.S. technology.

A pro-Chinese government group has impersonated environmental campaigners on social media platforms in an effort to undermine rare earths producers in the US and Canada, according to a cyber security consultancy. Mandiant said the group behind the attacks, known as Dragonbridge, had used fake Facebook and Twitter accounts to claim a US government-funded rare earths refinery in Texas being built by Australian group Lynas Rare Earths would “expose the area to irreversible environmental damage” and “radioactive contamination”. Mandiant described Dragonbridge as a “pro-People’s Republic of China (PRC) network” but did not identify it in more detail. The Australian Strategic Policy Institute think-tank corroborated Mandiant’s report to the Financial Times.
China’s plan to establish a yuan pooling scheme with the Bank for International Settlements (BIS), plus Indonesia, Malaysia, Hong Kong, Singapore and Chile could pave the way for the currency to play an anchoring role in the Asia-Pacific region, analysts said. The plan comes amid heightened worry in Beijing about US dollar hegemony and as global investors search for safe harbours while the US embarks on monetary normalisation to tame high inflation.

Russia-China Relations
India’s biggest cement producer, UltraTech Cement(ULTC.NS), is importing a cargo of Russian coal and paying using Chinese yuan, according to an Indian customs document reviewed by Reuters, a rare payment method that traders say could become more common. UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK that loaded on the bulk carrier MV Mangas from the Russian Far East port of Vanino, the document showed. It cites an invoice dated June 5 that values the cargo at 172,652,900 yuan ($25.81 million). Two trade sources familiar with the matter said the cargo’s sale was arranged by SUEK’s Dubai-based unit, adding that other companies have also placed orders for Russian coal using yuan payments.
Iran, which holds the world’s second largest gas reserves, has applied to join the BRICS group of Brazil, Russia, India, China and South Africa that Beijing and Moscow cast as a powerful emerging market alternative to the West.
China has called for NATO members to drop their “Cold War mentality” after the intergovernmental military alliance declared Beijing was a “challenge” to its interests and security. “NATO should stop drawing ideological lines, stoking political confrontation, or seeking to start a new Cold War,” Mr Zhao said.

CCP Foreign Influence
For almost two decades, the synergy between China and Germany worked. China contributed low wages and input costs. Germans contributed technical know-how and the fruits of decades of engineering breakthroughs and research. Young Chinese workers got jobs. Aging German investors got profits. But in the end, Germany has lost out to China’s manufacturing prowess. China’s auto industry is surpassing Germany’s, certainly in size and soon, perhaps, in quality. China’s relentless focus on digitalization and other emerging technologies is reducing its dependence on a rival whose manufacturing and engineering heyday was in the 1970s. Original analysis by Enodo Economics shows that Beijing’s “Made in China 2025” industrial policy has done exactly what critics warned it would.
Although China failed to secure endorsement from the Pacific Island nations for its proposed regional agreement this month, it successfully finalized a controversial bilateral security pact with the Solomon Islands in May. The pact reportedly allows the deployment of Chinese police and docking of Chinese ships in the islands. The agreement first sparked backlash when an unsigned document was leaked on Twitter back in March. The leak caused concern among the United States, Japan, and Australia that the agreement would lead to the establishment of a Chinese military installation in the Solomon Islands. Considering the United States and its allies’ opposition to a Chinese foothold in the South Pacific, the agreement is a significant diplomatic victory for Beijing.
There will be no easy exit from this new chapter of Sino-American strategic competition—a chapter that arguably started with Xi’s moves against the South China Sea and neighboring states seven years ago, as the Obama administration was still exploring modalities for a productive bilateral relationship. Extended interviews and in-depth crisis scenario exercises with dozens of companies and investors, including to an elite group of participants in the Bloomberg New Economy Forum, about these issues over the past few months, have revealed an unexpected combination of overconfidence and resignation in their views.
Chinese university graduates are struggling to find work in the country’s worst labour market in years — unless they have degrees in Marxism. Despite being China’s ruling ideology, Marxism has for decades been an obscure major for students. But it is enjoying a revival under President Xi Jinping, who has urged Chinese Communist party cadres to “remember the original mission” as he prepares to begin an unprecedented third term in power this year.

COVID-19
Economic activity in China expanded in June after three straight months of contraction, according to official surveys of businesses and factories that point to a modest recovery after Covid-19 restrictions were eased in the world’s second-largest economy. Economists are downbeat about the prospects for a major revival, however, given the darkening global backdrop and the risk of further Covid outbreaks.
President Xi Jinping solidified the position during a trip to Wuhan, where the pathogen first emerged in 2019, saying China is capable of achieving a “final victory” over the coronavirus. The Covid Zero policy is the most effective and economic approach for the country, Xi said Tuesday during the visit, the official Xinhua News Agency reported. The first update of the National Health Commission’s protocol since May 2021 sparked enthusiasm in financial markets and increased demand for travel by cutting quarantine time in half, with some analysts projecting it may signal the start of China’s withdrawal from the Covid Zero approach that largely cut it off from the rest of the world since 2020.

Hong Kong
Mr. Xi’s decision to visit Hong Kong despite a recent rise in Covid infections in the city underscores the importance of signaling his control over the former British colony. This is Mr. Xi’s first time in Hong Kong since pro-democracy protesters mounted a serious challenge to Beijing’s rule in 2019 that roiled the territory for months. In the years since, Mr. Xi has enforced a sweeping crackdown on dissent, with the arrests of thousands of people, including leading opposition figures, lawmakers, academics, newspaper editors and a retired Catholic bishop. Mr. Xi has not left China in 29 months. His absence has been increasingly conspicuous, especially as a flurry of diplomacy arose in response to the war in Ukraine and the ensuing political, military and economic fallout. 
Hong Kong was not supposed to look like this, 25 years after the end of British colonial rule and midway through China’s promised 50 years of autonomy and personal freedoms. There are now more than 1,000 political prisoners languishing in Hong Kong’s jails, among them activists, students, journalists and lawyers. Dozens have been jailed for a year or longer without bail in the legal limbo of “pretrial detention.” Some 47 opposition politicians face possible life in prison because they participated in a primary election, considered subversive in the new Hong Kong.
Chief Executive Carrie Lam’s departure from office Thursday closes what’s arguably been the most difficult chapter in Hong Kong’s history since its return to Chinese rule a quarter century ago. Lam’s five-year tenure saw more than 1 million people march against her government, and months of often violent street protests, after she tried to allow extradition to China. Beijing responded with unprecedented interventions in the former British colony’s legislative and electoral framework that crushed open dissent in the once freewheeling city. 

Taiwan
Trade talks between Taiwan and the United States this week give the self-ruled island a chance to accelerate exports to the giant Western consumer market and away from mainland China, a political adversary that many Taiwanese firms still depend on for business, according to officials and analysts. The initiative, announced by US President Joe Biden’s administration on June 1, calls on the US to support Taiwanese agriculture, which has lost consumers in mainland China over political spats, and to engage more in its digital economy – a sector that US officials hope to avoid in China over intellectual property concerns.
 A U.S. Navy aircraft’s flight through the Taiwan Strait last week demonstrated a U.S. commitment to a free and open Indo-Pacific, the U.S. military said on Tuesday, after China complained it endangered peace and stability.
The main opposition Kuomingtang (KMT) party on Wednesday (June 29) issued a statement refuting claims by the Taiwan Affairs Office (TAO) that Taiwan is ruled by Beijing and the Taiwan Strait is its “internal waters.” TAO Spokesperson Ma Xiaoguang (馬曉光) claimed the People’s Republic of China (PRC) replaced the Republic of China (ROC) on Oct. 1, 1949 to “become the sole legal government of China, the sole representative in the world, and fully enjoys the right to exercise China’s sovereignty, including sovereignty over Taiwan.” In response, the KMT issued a statement on its website pointing out, “The Republic of China has always been a sovereign and independent country, and the People’s Republic of China has never ruled Taiwan.” The KMT condemned TAO’s claims as “not only hurting the feelings of Taiwanese, but also being detrimental to the peaceful development of cross-strait relations.”
Western nations need to do more to ensure Taiwan can protect itself against China, the UK’s foreign secretary has urged. Liz Truss said she was working with allies in the G7 group to ensure the self-ruled island has “the defence capability it needs”. She added the West had failed to arm Ukraine early enough to deter Russia from its invasion earlier this year. It comes amid fresh tensions between China and the US over Taiwan. In an apparent change of tone, US President Joe Biden stated unequivocally that the US would defend the island if China attacked.
Taiwan on Wednesday rebuffed a complaint from the Philippines about live fire drills around a Taiwan-controlled island deep in the South China Sea, saying it had the right to do so and always gives issues a warning of its exercises.

Xinjiang
A new U.S. law meant to penalize forced labor in China’s western Xinjiang region is showcasing the still-fearsome reach of American economic power—and its limits. The law is already having a marked impact on one of Xinjiang’s key industries—cotton—and has the potential to seriously damage China’s textiles industry, the world’s largest. But the lack of impact on another key Xinjiang product—polysilicon, used to make solar panels—showcases the law’s limits. Companies in both sectors have been implicated in the use of forced labor, according to the U.S. government.
Matthew P. Robertson, a data scientist with VOC, and Jacob Lavee write: China’s crime against humanity—of massive executions by organ-procuring physicians—has been accomplished secretly under the headlights of operating rooms, and so for decades has been hard to detect. The global silence with which these crimes have been met is unconscionable—crimes similar to those of the Nazi doctors are repeating themselves in front of our eyes, and yet the world remains quiet. It is high time for Western scientists, doctors, and the rest of humanity to reaffirm the sanctity of the Hippocratic oath and give meaning to the Jewish slogan after the Holocaust: Never again.

The China Debrief is a resource of the Victims of Communism Memorial Foundation.

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