China Geopolitical Watch – From October 29 to November 4, 2022

11/01/2022 : Hong Kong is struggling to convince global CEOs to invest in the region. -Thomas Taochy-

«Hong Kong is back». Those were the words of Hong Kong Chief Executive John Lee Ka-chou at an economic summit held between 1 and 3 of November. The latter wanted to mark the region’s return to business after the lifting of COVID-19 restrictions, thus encouraging CEOs to invest in the Hong Kong market.

The general reaction was however disappointing for Hong Kong and John Lee Ka-chou lamented the absence of 3 major bankers despite the presence of 200 people: Citigroup CEO Jane Fraser, Blackstone Chairman John Gray and Barclays CEO C. S. Venkatakrishnan. Many investors are indeed hesitant due to the difficult economic situation in Hong Kong. According to the media SCMP, the region has suffered a recession with the economy shrinking by 4.5% in the third quarter compared to the previous year. This has prompted major players such as HSBC Bank to raise their base rate by 25 percentage points.

Nevertheless, John Lee Ka-chou insisted that Hong Kong is a space «full of vigour and energy». Thus, the governor of the People’s Bank of China Yi Gang and other CEOs of Chinese banks attended the summit, confirming President Xi Jinping’s promise of «full support for Hong Kong to develop its economy». In addition, Hong Kong said it was ready for regional economic cooperation with ASEAN, which John Lee Ka-chou called «the world’s largest free trade pact».

11/01/2022: Despite the political turbulence, will Pakistan be able to call on Sino-Pakistani friendship to overcome its economic crisis? -Ines Eugene-

«China and Pakistan are good friends, good partners and good brothers» stated Xi Jinping during the visit of the Pakistani Prime Minister to Beijing, according to the ministry of foreign affairs of the People’s Republic of China. Indeed, on November 1, Shehbaz Sharif began a two-day trip to Beijing. He seeked more financial support for his country, which is facing an inflation rate of more than 20% and a depreciation of its currency resulting from the floods that ravaged the country and affected more than 33 million Pakistanis.

Since taking office, Sharif has prioritized the revival of the US$62 billion China-Pakistan economic corridor (CPEC). This time, Pakistan is hoping for significant Chinese financial assistance, particularly for public transport and electricity production projects.

However, the political instability in Pakistan has put this assistance in question. Firstly, China reported numerous attacks on its employees in Pakistan, whose security Pakistan cannot guarantee. Secondly, since the Pakistani elections in April that brought S. Sharif to power, former Prime Minister Imran Khan has launched a protest march to Islamabad to force early elections. China fears that it could degenerate into destabilizing violence – which is what happened with the attempted murder of Imran Khan on November 3. Thus, despite the affection of the Chinese government for Shehbaz Sharif, its medium-term power is questioned and the political instabilities in Pakistan since 2017 have made China less willing to invest in the country in the long term.

11/02/2022: Beijing reassured by Hanoi in the face of the Western «threat» – Vadim Leduc Argenta –

While relations between China and the West are becoming increasingly tense, on November 2 Beijing confirmed its bilateral and peaceful relations with Hanoi. At the end of a four-day visit to China, Nguyen Phu Trong, the head of the Vietnamese Communist Party, assured Beijing of his desire to strengthen Sino-Vietnamese relations by reassuring Xi Jinping about the presence of foreign military bases in Vietnam. The latter declared that his government sought to work with Beijing to maintain peace and stability, while avoiding maritime conflicts «affecting the overall development of relations between the two countries». Indeed, the two sides are disputing certain maritime territories such as the Spratly Islands located in the South China Sea.

According to the report of the meeting provided by China, Nguyen Phu Trong declared that Vietnam would not host any foreign military bases. However, Vietnam also assured that it would not «ally itself with one country against another». This stance maintains Hanoi’s neutrality in the face of Beijing’s and Washington’s influence. Thus, according to former instructor and analyst of the People’s Liberation Army (of China) Song Zhongping, «Hanoi avoids the kind of lateral selection that occurred during the Cold War». Specifically, the Global Times points out that this meeting sets the tone for Sino-Vietnamese relations at a time when the world is facing unprecedented great power competition.

11/02/2022 : The United States and China are continuing their efforts to organise a meeting between the two leaders. -Thomas Taochy- 

The US and Chinese governments have been actively working since November 2 to set up an in-person summit between the two presidents. As National Security Council spokesman John Kirby explained: «Our two teams are still working on the details of a possible meeting between [Joe Biden and Xi Jinping]».

These efforts come in the context of the upcoming mid-term elections when more and more Americans have a negative view of China and senators and congressmen have called for a tougher policy towards Beijing.

The Sino-American relationship is also deteriorating. As recently as November 3, Chinese Foreign Minister Wang Yi called on nations to «jointly resist the abuse of arbitration» by Washington on maritime disputes. Also, Chinese Ambassador to the US Qin Gang, who wrote a note last month calling far-right Senator Josh Hawley «arrogant and despicable, part of a pernicious political agenda leading the US down a bad and dangerous path», is among the candidates for China’s next foreign minister, according to the media SCMP.

11/03/2022 : Sino-U.S. tensions cause Taiwan to rethink its production strategy -Anna Balawender-

Tensions between Beijing and Washington have reached new heights in recent months, and Taiwan fears it will take its toll. Since October, the Biden administration has imposed a series of sanctions on Chinese technology companies, also affecting Taiwanese factories operating in China.

Taipei has allowed its companies to invest nearly 933 million US dollars (USD) in the United States in 2022, and TSMC, the world’s highest precision chipmaker, already has assembly plants on its soil. By comparison, the government’s investment in China is $70 million for 2022, but the actual investment was only $29.5 million in October.

Nevertheless, production costs in the United States are much higher than in China, so Taiwanese authorities and entrepreneurs are thinking about a «plan B», in the words of John Eastwood quoted by the South China Morning Post. And the most plausible alternative for the moment is a historical rival of China: India.

On October 9, Taiwan’s representative in New Delhi, Baushuan Ger, announced that the Indo-Taiwanese free trade agreement was close to being finalized, and said that Taiwan was willing to share its technological expertise with its Indian partner. In addition to attractive production costs and a large domestic market, Estela Chen, a Taiwanese official also based in New Delhi, explains the Taiwanese enthusiasm by the qualitative improvement of Indian production lines.

The economic rapprochement was confirmed by the signing of a memorandum of understanding on November 4 between the Indian Chamber of Commerce and a Taiwanese delegation. The Hindu reports that the agreement focuses on high technology aimed at improving energy productivity, energy conservation, and waste management of India-based industries.

11/04/2022 : China and Tanzania sign 15-point agreement during presidential visit. -Thomas Taochy-

Tanzanian President Samia Suluhu Hassan visited China on November 4 to ratify a new agreement with her counterpart Xi Jinping. This is the first visit by an African leader since the last Party Congress (which saw Xi Jinping re-elected for a third term as Chinese president).

Samia Suluhu Hassan signed a multi-million dollar agreement with China during her first official visit since taking office. The 15-point agreement includes, among other things, a project to upgrade the Tazara railway line linking Tanzania and Zambia. Already financed by China 50 years ago, the railway is still its largest foreign aid project, according to the SCMP media.

The agreement also allows a cancellation of the debt contracted by Tanzania amounting to a little more than 13 million dollars and gives privileged access of Tanzanian products to the Chinese market with a lowering of customs duties up to 98% according to the official website of the Chinese Ministry of Foreign Affairs.

Tanzania also expressed its support for China on the Taiwan issue. Finally, with a view to furthering the relationship between the two countries, Xi Jinping was quoted as saying : «China firmly supports Tanzania in safeguarding its sovereignty, security and development interests, and firmly supports Tanzania in exploring a development path that suits its national conditions».

11/04/2022 : German Chancellor Olaf Scholz in Beijing -Anna Balawender-

On November 4, German Chancellor Olaf Scholz met with Xi Jinping in Beijing. The newspaper Le Monde recalls that Mr. Scholz is the first European Union leader to visit the Chinese leader since the beginning of the pandemic, but also since the renewal of his third term as head of the Chinese Communist Party and president of the PRC. The chancellor’s visit to Beijing has sparked controversy among Berlin’s European partners, who accuse him of wanting to go it alone, at a time when European solidarity is being tested by the war in Ukraine.

«It is in [China’s] interest to divide us, it should be in our interest to stay united», said Estonian Prime Minister Kaja Kallas. During the working meeting on the relationship of the European Union with China, the European representatives had also reaffirmed their qualification of the Chinese power as «partner, competitor, and systemic rival», recalls the South China Morning Post.

Chancellor Scholz, recalls journalist Pierre Haski on France Inter, is facing a dilemma: on the one hand, he is the heir to the conciliatory policy of his predecessor, Angela Merkel, who met Xi Jinping on several occasions. On the other hand, he has to deal with his partners in the European Union, who no longer seem to want to make concessions to authoritarian powers. Trying to find a middle ground, Mr. Scholz insisted that he would not shy away from evoking «all the sensitive issues», from the Uyghur file to climate issues, national debts and fair competition between Chinese and European companies.

Beijing, for its part, seemed to be delighted with the choice of the chancellor, celebrating his arrival with the announcement of a $17 billion contract with Airbus. The aircraft company said in the wake that the announcement of purchase of 132 A320 and 8 A350 by the Chinese firm CASC was actually several weeks (July 2022) or even several years (2019), Reuters writes. One contract whose novelty cannot be denied, however, is the one signed by Germany with Cosco, a company owned by the Chinese government. The deal gives Cosco a 24.9% stake in one of the terminals at the port of Hamburg, explains the China Digital Times. This is a smaller share than the 35% initially envisaged by Berlin, which reduced its forecasts following pressure from its European and American partners.

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