A regular feature of Taiwan Sentinel, ChinaWatch examines developments in China in the areas of internal politics, economics and trade, geopolitics and Taiwan engagement and analyzes their advantages or disadvantages for Taiwan’s standing in the region and the world. This feature is based on the premise that what happens in China has direct relevance for the durability of Taiwan’s de facto independence. ChinaWatch is updated at fortnightly intervals, or as events dictate.
Internal Politics
Bowing to Chinese Demand, Apple Withdraws
New York Times App from China Stores
Apple has withdrawn the New York Times app from its China Stores, after Chinese authorities informed the Cupertino, California-based company that the app “is in violation of local regulations.”
Times spokeswoman Eileen Murphy said the move by the authorities was aimed at preventing readers in China “from accessing independent news coverage.”
She said it appeared to be connected to new regulations aimed at curbing activities that the Chinese define as “endangering national security, disrupting social order and violating the legitimate rights and interests of others.”
The New York Times has been a prominent victim of an ongoing Chinese campaign to cut off Chinese readers from western media content, particularly from articles about China itself. Foreign sites are frequently blocked, including that of the Times itself, which in 2012 published a number of embarrassing reports on the wealth of leading members of the Chinese political elite, including Prime Minister Wen Jiabao.
The campaign against Western media has gathered steam under the control-obsessed regime of President Xi Jinping, which has made a high national priority out of aligning all journalistic content with the dictates of the Chinese Communist Party (CCP).
Some western media sites are nevertheless still available in China, including the Washington Post, BBC News and CNN, though China-related content on those sites is frequently blocked.
Murphy said the Times had asked Apple to reconsider its decision, but to no avail. According to Bloomberg News, 22 percent of Apple’s worldwide sales are in China, underscoring the company’s limited options in trying to navigate between the desires of the Times on the one hand, and the demands of the Chinese authorities on the other.
Report Calls Impact of Chinese Anti-Corruption Campaign ‘Superficial’
A detailed report in Britain’s Financial Times newspaper has cast serious doubts on the long-term impact of Chinese leader Xi Jinping’s anti-corruption campaign, saying that Beijing’s claims of “huge progress” against official malfeasance are “clearly overblown.”
It said that aside from causing lower-ranking officials to be more careful about flaunting ill-gotten gains, the campaign’s effects have been mostly superficial.
The report said Chinese businesspeople are now complaining that the cost of bribing officials has actually risen, because of the greater risk inherent in corrupt transactions. It added that businesspeople are now having to come up with increasingly sophisticated schemes to get bribes to the right officials.
“The obstacles to rooting out corruption in China are partly systemic,” the report said. “Official salaries and benefits are minuscule, especially compared with the power that representatives of the state wield over all aspects of the economy.”
The Chinese anti-corruption campaign got under way shortly after Xi came to power in 2012, largely as an effort to dampen down growing discontent following years of bribe-taking by CCP cadres and senior government officials. It is strongly supported by ordinary Chinese, and of course by Xi himself, who sees it as a crucial step to maintain Communist Party control over the long term.
In 2015, the last year for which data is available, corruption indexing organization Transparency International ranked China the 83rd most corrupt nation among the 167 it analyzed. It said that Chinese corruption levels were largely unchanged over the previous two years.
Economics and Trade
Possible Obama Swansong: Tough Restrictions
on Chinese Semiconductor Investment in U.S.
A detailed report in the Wall Street Journal says the Obama administration is putting the finishing touches on a study that could lead to draconian restrictions on Chinese investment in the American semiconductor sector.
The report says the study is being carried out by President Obama’s chief science adviser and is due to be published before Jan. 20 when Obama leaves office. It suggests that one of its main recommendations may be to direct the super-secretive Committee on Foreign Investment in the U.S. (CFIUS) to take a far harder line on Chinese semiconductor activities than had previously been the case.
CFIUS was established in 1975 to review foreign acquisitions of American assets. It is chaired by the Department of the Treasury, and also includes representatives from Justice, Defense, State, and at least five other executive agencies. It has the power to block acquisition deals by foreign interests or amend their terms to protect against the transfer of technology or sensitive information to countries like China.
China has made deepening its footprint in cutting-edge semiconductor development a national priority. U.S. Commerce Secretary Penny Pritzker recently identified Beijing’s US$160 billion program to become a world semiconductor leader as a threat to American security and a major reason for the Obama administration study.
While CFIUS has recently given the green light to a number of Chinese investment proposals, including the acquisition of the Chicago Stock Exchange by the Chongqing Casin Enterprise Group, it has also been toughening its attitude on several proposed Chinese semiconductor deals, largely to quell fears that America will at some point lose control over an industry that is deemed critical to U.S. national security.
Just last month it rejected the proposed sale of Aixtron SE of Germany — which has an American subsidiary — to the German unit of China’s Fujian Grand Chip Investment Fund. That move followed similar CFIUS decisions over the previous two years to nix two major Chinese semiconductor acquisition efforts in the U.S.
The apparent hardening of Obama’s line on Chinese investment in the American semiconductor sector offers a rare example of policy convergence between the outgoing and incoming administrations. Throughout his campaign for the White House, President-Elect Donald Trump went out of his way to promise a tougher stance on commercial dealings with China. His recent nomination of well-known China-critic Peter Navarro to head a new international trade office appears to show just how serious he is about keeping his promises.
Congressional Research Service Report Highlights
Key Areas in US-China Trade Tensions
A far-reaching report authored by the authoritative Congressional Research Service has identified cyber espionage against U.S. firms, poor intellectual property rights enforcement, currency manipulation and financial support for Chinese state-owned firms as the key factors behind rising Sino-American trade tensions.
Incoming American President Donald Trump has made leveling the commercial playing field between the United States and China as one of the key priorities of his new administration. The Congressional Research Service report will give ballast to his concerns, not least because the Republican-dominated Congress can be expected to reference it in backing the president’s policies.
Two-way trade between the United States and China has grown from US$2 billion in 1979, when China embarked on a series of comprehensive economic reforms, to US$599 billion in 2015. China is now the U.S.’s second largest trading partner, with a near term potential of $400 billion in annual offtake of American goods and services. In 2015, however, the U.S. ran a US$365 billion China trade deficit.
The CRS report identified relatively cheap Chinese imports and Chinese purchases of U.S. Treasury Securities as key advantages the U.S. derives from its China trade connection. But it said that “the bilateral relationship has become increasingly complex and often fraught with tension” because of widespread American perceptions that China is exploiting the relationship by resorting to unfair means.
According to the report, “major areas of concern expressed by U.S. policymakers and stakeholders include China’s alleged widespread cyber economic espionage against U.S. firms; relatively ineffective record of enforcing intellectual property rights; discriminatory innovation policies; mixed record on implementing World Trade Organization (WTO) obligations; extensive use of industrial policies (such as financial support of state-owned firms and trade and investment barriers) in order to promote and protect industries favored by the government; and interventionist policies to influence the value of its currency.”
The report set out a number of punitive measures the U.S. might take to hit back at China on the trade front, including increasing the number of WTO dispute settlement cases it brings against China, designating China as a “currency manipulator” and threatening to impose anti-China sanctions unless Beijing addresses the source of the American complaints.
Economics and Trade
U.S. Navy to Deploy Anti-Stealth Aircraft to Japan
The U.S. Navy says that it will deploy to Japan its newest airborne early warning and control aircraft, in a move that is widely seen as a counter-measure to Chinese and Russian stealth fighters operating in Northeast Asia.
The Navy says the E-2D Advanced Hawkeye will act as the eyes and ears of U.S. Navy Carrier Strike Group Five. Centered on the Nimitz-class aircraft carrier USS Ronald Reagan, the group is now based in Yokosuka, Japan. The Hawkeyes are presently located in Norfolk, Virginia.
According to the navy: “These moves are in accordance with (our) strategic vision for the rebalance to the Asia-Pacific, a plan to put the most advanced and capable units forward in order to support the United States’ commitment to the defense of Japan and the security and stability of the region.”
The Hawkeye is fitted with Lockheed Martin AN/APY-9 UHF-band radar, which is said to be able to detect fifth-generation stealth aircraft, including China’s Chegdu J-20 and Shenyang J-31, and Russia’s Sukhoi PAK-FA.
Hardline Protectionist Named to Key U.S. Trade Post
In yet another sign of incoming U.S. President Donald Trump’s confrontational posture toward China, the New York billionaire has named a pro-protectionist lawyer to be U.S. Trade Representative.
The nominee is Robert Lighthizer, who served as deputy U.S. Trade Representative under President Ronald Reagan in the 1980s. Since leaving government, Lighthizer has worked in Washington, where he has won a fearsome reputation for litigating trade disputes on behalf of American steel-makers, many of whom believe that cheap foreign imports have undermined their businesses.
The Lighthizer appointment comes in the immediate wake of Trump’s nomination of Peter Navarro to head up a newly established White House trade office. Many analysts believe Navarro is now prepared to direct a no-holds barred trade war against China, despite receiving repeated warnings from many mainstream Republicans that such a move would upend the American economy.
The Lighthizer appointment also follows heightened Trump criticisms of China’s supposedly mercantile trade practices, including its continuing refusal to treat foreign imports with equanimity. Many Chinese commentators had downplayed the importance of the strong anti-China rhetoric Trump employed on the campaign trail, seeing it as so much political cant. Following the Navarro appointment however — to say nothing of Trump’s unprecedented questioning of the “one China” policy and his equally unprecedented post-election telephone conversation with Taiwanese President Tsai Ing-wen — they are beginning to have second thoughts about Trump’s China attitudes. Lighthizer’s nomination will almost certainly deepen their concerns.
Lighthizer’s nomination is subject to Senate confirmation. Notwithstanding mainstream Republican doubts about promoting protectionist trade policies, it is expected to be approved without difficulty, not least because of a general Republican disinclination to confront the new president on personnel issues.
Taiwan Engagement
Former Taiwan Affairs Office Deputy: China Must Replace KMT
as Pro-Independence Counterweight
The former deputy head of China’s Taiwan Affairs Office (TAO), the State Council body responsible for implementing Beijing’s Taiwan policy, has said that the Kuomintang (KMT) is no longer strong enough to rein in the pro-independence tendencies of the ruling Democratic Progressive Party (DPP), and that that job must now be assumed by China itself.
The comments by Wang Zaixi underscore the failure of China’s longstanding Taiwan policy, which for some 20 years had counted on the KMT to superintend Taiwan’s eventual political integration into the mainland. While China was clearly disappointed by the party’s historic electoral defeat at the hands of the DPP a year ago, Wang’s remarks are the clearest indication to date that it sees little or no hope for a KMT comeback in the near to medium term future.
Wang was interviewed by the CCP-controlled Global Times newspaper in December.
In his comments, he acknowledged that most Taiwanese support the political “status quo,” under which Taiwan maintains its de facto independence, free of communist control.
Reflecting the strength of that support, Wang said a solution to the Taiwan “problem” would not be found overnight, and that trying to impose an arbitrary time frame on “a complicated issue such as reunification across the (Taiwan) Strait is impractical and unscientific.”
That comment flies directly in the face of a 2013 declaration by Chinese leader Xi Jinping that the Taiwan issue should not be allowed to be passed along from generation to generation, but rather, should be resolved at a relatively early date. Xi’s comment came when the KMT still controlled the Taiwanese presidency and legislature, and seemed to have relatively sanguine prospects for the 2016 elections.
In his interview, Wang poured cold water on the idea of Beijing imposing economic sanctions against Taiwan, saying that such a step would only harm the interests of rank and file Taiwanese, whose support China needs to bring about the unification it seeks.
Pro-China Demonstrators Harass Hong Kong Activists in Taiwan
Pro-China demonstrators in Taiwan have harassed a pro-democracy activist and three legislators from Hong Kong in what appears to have been a strong signal from Beijing that it is not prepared to remain silent in the face of compelling political challenges on its periphery.
The objects of the harassment were Joshua Wong, one of the leaders of the pro-democracy protests that swept Hong Kong in 2014, and three Hong Kong lawmakers who have spoken out forcefully against Chinese attempts to muzzle independent thinking in the former British colony.
Hong Kong reverted to Chinese control in 1997, but under the terms of an agreement worked out between Beijing and London, it is meant to maintain its quasi-democratic character until 2047.
The Hong Kong activists were in Taiwan for a weekend conference to discuss ways of advancing democracy. The conference was organized by Taiwan’s New Power Party, a political grouping that grew out of the wave of anti-government demonstrations that swept Taiwan in the spring of 2014 to protest President Ma Ying-jeou’s controversial bid to pass a measure tightening China-Taiwan trade ties. The measure was never adopted.
Local media reports say that a mélange of pro-China groups including a fringe pro-China party and China-backed triad members was behind the harassment of the pro-China activists. The harassment began at Taiwan Taoyuan International Airport when the visitors arrived on Jan. 7 and continued the next day at the conference venue. Upon their return to Hong Kong, two of the group members — Wong and lawmaker Nathan Law — were physically assaulted by pro-China activists, and required medical attention.
China has been consistent in trying to dampen down pro-democracy, anti-China sentiment in Hong Kong, not only by preventing elected lawmakers from taking their seats on a local council, but also by kidnapping local publishers seen as defaming the Chinese leadership.
It has also encouraged occasional demonstrations in Taiwan, including one against the Dalai Lama when he visited the island-nation in 2009. In addition pro-China activists regularly harass Falun Gong practitioners in downtown Taipei, this in line with China’s prevailing belief that the Falun Gong religion constitutes an existential threat to Communist Party power.
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