China Puts Its Hong Kong Enforcers In Place

A vessel bearing the slogan 'celebrating the passage of the Law of the People's Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region' seen in Victoria Harbour, Hong Kong, July 1, 2020. Photo credit: Xinhua

THE HONG KONG government has appointed its committee to oversee the territory’s new National Security Law. It will be headed by Chan Kwok-ki as secretary-general. but the man who matters is Zheng Yanxiong, newly appointed to be head of the office Beijing is setting up to oversee the law, an office that will report directly to Beijing.

Zheng has most recently been the Party boss in Guangdong, best known for his crackdown in Wukan, a village in the province that had a short-lived exercise in local democracy following a citizen’s revolt against local officials’ land grabs back in 2011.

Luo Huining, who heads Beijing’s liaison office in Hong Kong, has been appointed as National Security Advisor to the city’s chef executive, Carrie Lam.

Six judges have been appointed to the special courts that will hear cases under the new law. The first case brought before it was that of Tong Ying-kit, a 23-year-old motorcyclist accused of riding into a group of policemen during the protest on July 1 carrying a flag calling for the liberation of Hong Kong. Chief Magistrate Victor So Wai-tak presided. The other five judges are not yet known.

Meanwhile, US lawmakers have passed legislation imposing sanctions on Chinese officials involved with the imposition of the new law.

That will cut no ice with Beijing. Indeed, Deng Zhonghua, deputy chief of the State Council’s Hong Kong and Macau Affairs Office, told CCTV that the new National Security Law ‘is not a one-off’.

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China Presses Back

More tit for tat in the fractious relationship with Washington: four US media organisations — the Associated Press, United Press International, CBS and National Public Radio — have been told to file with authorities details of their staff, finances, operations and property in China within seven days.

The United States previously demanded the same details of CCTV, the People’s Daily, the Global Times and China News Service having designated them ‘foreign missions’ as opposed to independent news organisations. Foreign missions are required to get US government approval to buy or lease office space and to register personnel changes, including arrivals and departures, with the US State Department.

Xinhua, CCTV’s subsidiary China Global Television Network, China Radio International, China Daily and Hai Tian Development USA (distributor of the People’s Daily in the United States) were already similarly designated in February. In response to that, Beijing required the financial and personnel details of Voice of America, the New York Times, the Wall Street Journal, Time, and the Washington Post.

In addition, Beijing expelled journalists from several US news organisations, including the New York Times, the Washington Post and the Wall Street Journal (a trio unbeloved by either government), after Washington put a limit on the number of Chinese journalists allowed to work in the US for state-run media.

As this Bystander said when this all started:

Given China has state-run media and the Trump administration has made an art form of denigrating US media that disagree with him, accusations on both sides of the other damaging the freedom of the press will ring hollow. Yet the acrimony on this front [in the contestation between Washington and Beijing] will do nothing to improve mutual understanding that could help ease the acrimony on all the others.

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Hong Kong’s National Security Law Is Being Enacted

‘TIS DONE. Hong Kong’s new National Security Law has been approved, following another round of no doubt pro-forma discussion at the Standing Committee of the National People’s Congress. It will now become part of the city’s Basic Law.

State media reports that President Xi Jinping signed a presidential order to promulgate the law, which goes into effect as of the date of promulgation. Carrie Lam, Hong Kong’s chief executive, said the city’s government would complete the necessary steps so that the law would come into effect on June 30, the day before the anniversary of China’s resumption of sovereignty from the United Kingdom, a day of planned pro-democracy demonstrations.

At the time of writing, the full text is still yet to be made public, though its broad outlines are known. It criminalises activity in four areas — secession, subversion, terrorism, and collusion with a foreign country or ‘external elements’ to endanger national security — which gives authorities open-ended scope to suppress political dissent at will. The law will also extend the reach of mainland security forces into the city.

London and Brussels have been critical of Beijing’s imposition of the new law, which critics such as former governor Lord Patten say will end ‘one country, two systems’. Joshua Wong, Nathan Law and Agnes Chow, among the best-known of Hong Kong’s democracy activists, say they are withdrawing from Demosisto, the party they founded in 2016 and which now says will disband.

Meanwhile, Washington has suspended Hong Kong’s trade privileges and banned weapons exports to it.

A statement from Beijing’s Liaison Office in Hong Kong indicates that none of that will carry much weight in Beijing:

Nobody should underestimate the central government’s determination to safeguard national security in Hong Kong, underestimate the firm binding powers of the law after it’s in force or underestimate the central and Hong Kong government agencies’ enforcement abilities.

Done and dusted.

Update: The text of the National Security Law has now been published (English translation).

Postscript: Mao Zedong told US President Richard Nixon that he could wait 100 years for the reunification of Taiwan, a diplomatically deft delay for both sides that allowed mutual acknowledgement of the One China policy that was to be the basis of re-establishing US-China relations. Beijing’s de facto truncation of the 50 years of ‘one country, two systems’ in Hong Kong, makes this Bystander wonder what time frame Xi has in mind to foreshorten Taiwan’s reunification.

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A New List To Thwart Military-Civil Fusion

THERE ARE FEW surprises if any among the list of 20 companies released by the US Department of Defence that it says have ties to the People’s Liberation Army. It comprises defence contractors such as Aviation Industry Corporation of China (AVIC), telecoms companies such as the much-sanctioned Huawei Technologies and surveillance equipment producers such as Hikvision. More companies are likely to be added in future.

The US Congress first required the Pentagon to produce the list more than two decades ago. It is only with the advent of the Trump administration that the request has been acted on, or possibly that the list has been made public.

The overt reason for it is to detect supply-chain vulnerabilities in US weapons production. Under the International Emergency Economic Powers Act of 1977, the president has the power to level financial and trade sanctions against any company on the list. He can also choose not to do so, as he has so far done with his sanctions powers granted by the Uyghur Human Rights Policy Act of 2020.

More likely, the new list will be used to exclude the named companies from US government procurement tenders. The Pentagon is particularly concerned about advanced semiconductors and integrated circuits since both are critical for weapons systems, and have the obvious consequences if compromised. The same concerns are growing around artificial intelligence and cloud computing, both of which are at the heart of info- and cyberwarfare. Inspur, a big-data and cloud computing group, is on the list, as is Dawning Information Industry Co., known as Sugon, which Washington blacklisted last year for selling supercomputers to the PLA for nuclear weapons research.

Naming and shaming also fit squarely into the president’s efforts to deny Beijing access to US technology to slow its economic and military development. Similar to the Entities List, the new military list will let Washington use existing export control licences to hinder Chinese companies’ ability to buy US tech components. In April, for example, it changed the rules for granting such licences by expanding the definition of a military end-user to include the civilian supply chain, a direct strike at Beijing’s military-civil fusion strategy.

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IMF Cuts China GDP Forecast As Pandemic Weighs More Heavily

THE INTERNATIONAL MONETARY FUND has trimmed its forecast’s for China’s GDP growth this year by one-fifth of a percentage point to 1%. That is in line with the most recent estimates by its sister organisation, the World Bank, although both are more optimistic than the OECD.

The Fund has reduced its forecast for growth next year by a full percentage point to 8.2%. That cut reflects the likely drag of a world economy that the Fund expects to contract by 4.9% this year, against the 3% contraction it forecast in April.

Its newly published update to its World Economic Outlook says:

The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast.

Given China started to reopen in April, the Fund is expecting fourth-quarter growth for the Chinese economy to be 4.4% higher than in the corresponding quarter of 2019 thanks to government stimulus.

Policy has focused on vulnerable firms and households, including through the expansion of the social safety net, public health services and digital infrastructure. The risk remains that millions of households will fall through the gaps and will be left considerably poorer than before the pandemic. Consequent worries on the part of authorities about social unrest will thus persist, albeit at a low level and likely localised.

The relatively better economic performance of China than most other countries can also be found in this list of factors identified by the IMF:

  • the evolution of the pandemic and the effectiveness of containment strategies;
  • variation in economic structure, eg, dependence on severely affected sectors, such as tourism and oil;
  • reliance on external financial flows, including remittances; and
  • pre-crisis growth trends.

The risks, as the IMF notes, are mostly to the downside, but not exclusively. The recovery in investment and services in China through May was stronger than anticipated, offering at least one example of economic normalisation proceeding faster than expected. Progress in developing vaccines and therapeutics may come to the economy’s support. Changes in production, distribution and payment systems forced by the pandemic could spur productivity gains from accelerated digitalisation and environmental benefits from a switch from fossil fuels to renewables.

However, there are more dark clouds than silver linings, from the possibility of a second global wave of infections, of which the recent Beijing cluster may be prologue, to global trade recovering more slowly than expected. The United States could play a big part in both, but the darkest cloud, as the Fund notes without expressing it in such terms, is escalating tensions between Washington and Beijing on multiple fronts.

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One Planet, Four Systems

A TECHNOLOGICALLY DECOUPLED world of Chinese and US standards and systems has moved a step nearer, or at least a satellite launch nearer. China has sent up the final BeiDou satellite (see above) needed to complete its orbital navigation constellation, which will provide a rival to the US global positioning system, GPS, the EU’s Galileo and Russia’s GLONASS.

The BeiDou Navigation Satellite System (BDS) is designed to meet the needs of the country’s economic and national security goals. The project was conceived in the 1980s, and the first satellite launch dates back to 2000. There are now 27 satellites in medium Earth orbit, five in geostationary orbit and three more in inclined geosynchronous orbits.

With the system’s completion will come a wide range of applications for communications, fishing, hydrological monitoring, weather forecasting, surveying, mapping and geographic information, forest fire-prevention, time synchronization, disaster mitigation and relief and emergency search and rescue.

As well as the immense commercial value of such services (albeit it, no doubt, with rows to come about Beijing’s access to the data that flows through them), BDS gives Beijing military independence from the United States for a critical piece of space infrastructure.

It will take some time for the People’s Liberation Army to integrate BDS into its forces on the ground and its long-range conventional missile systems. The United States has 30 years of experience of using GPS in combat that the PLA will have to catch up on.

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Hong Kong’s National Security Law Smothers Dissent

Hong Kong skyline, September 2014

FLESH IS BEING put on the bones of the new national security law that Beijing is imposing on Hong Kong. The Standing Committee of the National People’s Congress reviewed a draft late last week. The full text has yet to be made public but the summary that was released will do little to reassure many in Hong Kong that the territory’s independent legal system under ‘one country, two systems’ will be anything but undercut.

Even state media’s assurances that under the new law, ‘anyone shall be presumed innocent until convicted by the judicial organs’ managed to convey that conviction was the inevitable endpoint of the process. As there is to be a new class of courts dealing with national security cases, with judges chosen by Hong Kong’s chief executive, herself handpicked by Beijing and to be advised by a new national security adviser appointed by Beijing, that very likely will be what the future holds.

At the same time, the chief executive is to appoint a commission to oversee national security in Hong Kong which will report directly to Beijing. Other key aspects of the law include Beijing’s ability to intervene directly in national security cases, taking them under mainland law. Beijing will also supervise the policing of threats to national security in the territory. These are broadly defined under the headings of secession, subversion of state power, terrorist activities and collusion with foreign or external forces, a swathe of offences broad enough for the Party to pursue any activity that it does not like.

The official narrative is one of the need for the new legislation to secure law and order in Hong Kong so it will remain attractive to foreign businesses and investors. That may betray a misunderstanding of what made Hong Kong attractive to foreign capital in the first place. Mainland firms will readily fill any vacuum, however, accelerating the absorption process. For residents, protest looks decreasingly viable or sustainable, but that is the intent.

Update: The South China Morning Post reports that the full text of the new law will not be published until after it is passed, which is expected to be by June 30, the eve of the 23rd anniversary of China’s resumption of sovereignty over Hong Kong.

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China And US Increase Financial Distancing

DECOUPLING THE ECONOMIES of China and the United States would be a Herculean task after three decades of globalisation. US Trade Representative Robert Lighthizer told a US Congressional Committee as much this week before he was tweeted down by his president, who said complete decoupling remains a policy option for his administration.

The president has taken policy measures aplenty to discourage Chinese trade and investment in the United States, with the intent particularly of keeping US technology out of Chinese hands. This is small-scale decoupling on the ground.

One example is the increased use of national-security reviews by the Committee on Foreign Investment in the United States, commonly known by its acronym CFIUS. It has had its mandate expanded and new scope to investigate property deals near critical infrastructure and military installations is also being added.

The committee’s latest report to Congress, from which the chart below is taken, makes clear both how much broader is the swathe of inbound foreign investments CFIUS is taking an interest in since President Donald Trump took office in 2017 and how increasingly effective a CFIUS investigation is in prompting would-be acquirers to back off.

Roughly one-quarter of CFIUS reviews involve Chinese acquirers, the largest share of any individual country.

Another is the administration’s threat to promote legislation that could force Chinese companies from US stock exchanges by requiring them to report to US accounting standards.

Bloomberg reported recently that 58.com, an online classifieds firm, was going to go private and thus delist its shares from a US exchange. That would make it the fourth US-listed Chinese company to do so this year, an aggregate removal of $8 billion in market capitalisation, the fastest pace of withdrawal since 2015.

Bloomberg reports a similar trend with initial public offerings, with global banks walking away from deals to list Chinese companies in the United States.

Nothing like full decoupling, to be sure, but a step in the direction of increased financial distancing.

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Uighurs Through The Looking Glass

TO THIS BYSTANDER’S eye, US President Donald Trump’s signing into law of property-blocking and visa sanctions on Chinese officials deemed to have committed human rights abuses in Xinjiang looks more to do with domestic US politics than further fraying of the already tattered relations between Washington and Beijing.

The US Congress passed the Uyghur Human Rights Policy Act of 2020 with bipartisan support, a further example of the hardening attitude of Republican and Democratic lawmakers towards China, a change of direction in US politics in which the president has been in the vanguard. There is no political mileage for him in standing in the way of it.

The White House is also scrambling to limit any damage to the president from a forthcoming book written by the veteran US neo-con diplomat John Bolton, who was Trump’s national security advisor until the two men fell out. Bolton reportedly claims in the book that ‘Trump said that Xi [Jinping] should go ahead with building the camps, which he thought was exactly the right thing to do’.

This Bystander would hazard that, if any such discussion took place, Xi probably couched it in vague terms about interring Muslim terrorists, knowing that the US president, famously disinterested in policy detail, was unlikely to press him further on the topic.

China’s response to the new US law was very much along those lines. According to a statement from the Foreign Affairs Committee of the National People’s Congress:

Xinjiang-related issues are nothing about human rights, ethnicity or religion at all, but about combating violence, terrorism and extremism…The United States has maliciously attacked China’s counterterrorism and deradicalization efforts, attempting to destroy the favorable situation of stability and development in Xinjiang, according to the statement.

The law is unlikely to do anything to alter Beijing’s policies in Xinjiang, and the direct impact of any sanctions is likely to be negligible. Beijing has already ridden out international condemnation over the detentions of up to 1 million people, mostly ethnic Uighurs, in ‘re-education camps’.

Even in this current Alice Through The Looking Glass world of US-China relations, in which the US president condemns China for something he reportedly said it should do, Beijing will regard the law as part of what it sees as Washington’s broader push to weaken it. Thus its response to Trump’s signing will be bombastic, but proportionate and asymmetric.

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Beijing’s Covid-19 Cluster Challenges The Party

SYMBOLICALLY, BEIJING IS the worst of places for a potential second-wave outbreak of Covid-19 to occur. Authorities have been forced to quarantine a large area in the west of the capital around the city’s main fresh-food market, Xinfadi, with 137 new cases reported there in the past six days.

Residents are being tightly monitored and travel restricted. Schools are closed. Taxis cannot leave the city and flights out of Beijing were cancelled on Wednesday. Destinations such as Macau are enforcing mandatory 14-day isolation on travellers arriving from the capital. Mask wearing in public in the capital is again becoming required, having been laxly practised of late as the first wave of the outbreak appeared to recede across most of the country.

Low though the numbers are by international standards, since Covid-19 was first reported in Wuhan, authorities have been particularly concerned about an outbreak of the infection in Beijing. This is both because it is the capital and political centre of the country and because it would undermine the official narrative of the Party’s success in managing the pandemic. Having to seal off the city, in the way the outbreak in the northeast near the Russian border was handled, would be embarrassing, but still cannot be ruled out at this point.

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