PHRASE OF THE MONTH: “To bury one’s head in the sand” (kin. 掩耳盗铃 yǎn’ěrdàolíng).
Context: The National Bureau of Statistics (NBS) announced that it will suspend the publication of youth unemployment data while the government seeks to “improve” and “optimize” statistical work. This announcement elicited decision on Chinese social media, with some users on Weibo accusing the government of “burying its head in the sand”. Indeed, the announcement comes at a critical juncture when the unemployment rate for 16- to 24-year-olds in urban areas hit a record high of 21.3%. However, instead of addressing the drastically worsening youth unemployment, the government has chosen to stonewall the issue.
Interestingly, the termination of youth unemployment data is the latest in a series of moves to restrict the flow of data. Notably, since China’s GDP growth started to slow down a decade ago, a cornucopia of economic data has been quietly discontinued, China becoming much less transparent about its economic performance. Therefore, the obfuscation of data should look less like a surprise and rather in line with China’s modus operandi: when faced with the unfavourable economic reality, the system intuitively dictates to tilt towards secrecy and opacity.
DOMESTIC POLITICS & FOREIGN AFFAIRS
1. Italy wants to withdraw from China’s Belt and Road Initiative
In 2019, during Chinese President Xi Jinping’s visit to Rome, Italy became the first Group of Seven (G7) country to join China’s Belt and Road Initiative (BRI), the largest ever global infrastructure undertaking. However, retrospectively, it is not difficult to see what had lulled Italy into the initiative. Having suffered through three recessions within a decade, Italy was looking to attract investment and expand Italian exports’ access into China’s lucrative market. Also, Italy’s former populist government was sceptical of the European Union (EU) and thus willing to tilt towards China to fulfil its investment needs. However, the reality that unfolded has trampled Italy’s hopes and expectations.
Since Italy joined the BRI, its exports to China have increased from 14.5 billion euros to 18.5 billion euros whereas Chinese exports to Italy have grown far more substantially, from 33.5 billion euros to 50.9 billion euros. This trade deficit has eventually induced the sobering realisation that the BRI would not be an economic panacea, and so the Italian government began to reassess its stance toward China.
The Italian Prime Minister Giorgia Meloni stated that Italy’s embrace of the BRI was a “big mistake” which she intended to correct by withdrawing from the initiative. Most recently, Italian Defence Minister Guido Crosetto also called Italy’s decision to join the BRI an “improvised and atrocious act”. In response to Italy’s consideration not to renew the Belt and Road cooperation document, China has dispatched a senior diplomat to Italy in hopes of persuading the country to renew the BRI deal. Concurrently, the Chinese Foreign Ministry said that “some forces have launched malicious hype and politicized the cultural exchange and trade cooperation between China and Italy under the Belt and Road framework in a bid to disrupt cooperation and create division.”
Reflecting on the withdrawal implications, on the one hand, it would be like a rock thrown into a pond, potentially stirring relations with China, which is still viewed as a land of opportunity and as an important market for Italian businesses and products. On the other hand, the withdrawal would reflect the growing transatlantic convergence on the challenge China poses, as well as jumping onto the same European “de-risking” wagon, thus moving further from economic dependence on China.
2. A crumbling facade of popularity
A global survey conducted by the Pew Research Center has reported that 67% of adults in 24 examined countries hold unfavourable views of China and less than 28% of respondents speak favourably of the country. In most high-income countries surveyed, negative views of China currently stand at or near historic highs, whereas attitudes toward China are rosier in middle-income countries. Notably, negative opinions of China are linked to concerns about the country’s policies on human rights, which are seen as a more serious issue than military power and economic competition.
Overall, the negative views could be perceived as a potential wake-up call for the Chinese President Xi Jinping to recalibrate China’s policies and especially to reassess its support for Russia in its war against Ukraine, which has led many European government to shed their illusions about the country. However, this wake-up call is somewhat silenced by the EU’s struggle to de-risk trade with China. Eurostat data shows that the value of goods coming from China almost doubled between 2018 and 2022. Notably, three of Europe’s best-selling electric vehicles last year were Chinese imports, accounting for 3–4% of all European car registrations, rising from zero a few years ago. Therefore, as unfavourable views of China have not yet translated into substantial de-risking actions undertaken by the EU, the US and their allies, China can turn a deaf ear to the wake-up call for the time being.
3. A wave of economic travails sweeping China
China’s post-Covid economy, once expected to be strong as the country emerged from lockdowns in 2022, seems to be like a paper tiger. According to data released by China’s General Administration of Customs, exports in July were down 14% year-on-year, their largest decline since February 2020, while imports fell by 12.4% – far more steeply than expected. The economy’s waning recovery from the pandemic has also damped confidence among overseas investors. Foreign direct investment (FDI) fell to a 25-year low in China in the second quarter of this year. Notably, an exception to this pervasive downward trend has been the unabated significance of Russia’s economy as China–Russia trade grew by 36.5% from January to July – still failing, however, to offset the overall declines.
Interestingly, the Chinese Foreign Ministry’s reaction to the grim trade numbers was a denial coupled with the accusation that Western politicians and media have “exaggerated and hyped up the current difficulties in China’s post-COVID economic recovery”. Similarly, the state-led news outlet Global Times has hidden gloomy figures behind positive rhetoric, stressing that “China’s economy remains resilient with a great potential and vitality”.
As much as Beijing would try to dispel the economic gloom by shifting the blame on the West and relying on positive rhetoric, the weakness in international trade is one of the main sources of pressure for policymakers in Beijing, who have already been grappling with a prolonged property sector slump and disappointing domestic demand since anti-pandemic measures were lifted in December.
SECURITY & DEFENCE
1. China is building a runway on Triton Island – the closest Chinese outpost to Vietnam
According to recent media reports, new satellite images indicate that China appears to be building a runway on Triton Island (Zhongjian Dao in Chinese, Dao Tri Ton in Vietnamese), a contested territory in the South China Sea involving China, Taiwan and Vietnam. This island, occupied and controlled by China since 1974, has been under development with new military and civilian installations being constructed.
While the news can be seen as a worrisome sign of increasing military tensions, China made sure not to escalate the already tense ties with Vietnam. The runway under development can be seen as more suitable for civilian use: it appears to be much shorter (around 630 meters) than China’s previously built runways on other islands, thus limiting the size of planes that could use it. Both Chinese and Vietnamese authorities were careful in their responses – Vietnam’s Ministry of Foreign Affairs has stated that the Vietnamese government is verifying reports on China’s activities. The Chinese Ministry of Foreign Affairs, on the other hand, reiterated its long-held stance that “Zhongjian Dao is part of China’s Xisha Qundao, which has all along been part of China’s territory. China’s construction activities on its own territory are legitimate, lawful and beyond reproach”.
Taiwan’s claims in the South China Sea largely coincide with China’s. Its Ministry of Foreign Affairs has also reacted that “the Republic of China’s (Taiwan’s) rights over land and related waters in the area cannot be questioned”.
2. Confrontation between China and the Philippines in the South China Sea
On August 5, a dangerous and increasingly common confrontation between China’s and the Philippines’ coast guard ships occurred at the Second Thomas Shoal in the Spratly archipelago, a disputed territory in the South China Sea. Chinese Coast Guards have blocked a chartered supply boat belonging to the Philippines and fired a water cannon. The Armed Forces of the Philippines and the Philippine Coast Guard have both condemned the actions as “dangerous” and “in wanton disregard of the safety of the people on board and in violation of international law”.
Several countries have responded to this incident in support of the Philippines: the US Department of State released a statement in which it stated that “PRC ships interfered with the Philippines’ lawful exercise of high seas freedom of navigation”; Australia’s ambassador to the Philippines expressed her concern over the “dangerous and destabilising” actions, while Japan’s embassy stated that “the harassment and action, which infringe on lawful activities of the sea and endanger the navigational safety,” were “totally unacceptable”.
BUSINESS & TECHNOLOGY
1. Another ice cube in the already chilled cup of US–China relations
The US President Joe Biden signed an executive order banning some new American investments in Chinese advanced technology companies whose products in the sectors of semiconductors, artificial intelligence or quantum computing may be used to improve China’s military, intelligence, surveillance, and cyber capabilities. According to the Treasury Secretary Janet Yellen, the cessation of US investments is rather to protect US national security and address human rights abuses. In response, Liu Pengyu, a spokesperson of the Chinese embassy in Washington, said that “the latest investment restrictions will seriously undermine the interests of Chinese and American companies and investors, hinder the normal business cooperation between the two countries and lower the confidence of the international community in the US business environment”.
SCIENCE, HEALTH & ENVIRONMENT
1. Typhoon Doksuri prompts public animus towards government
Among the biggest news in August has been the Typhoon Doksuri, which hit mainland China and has brought the heaviest rains in 140 years, with Beijing and the surrounding provinces of Tianjin and Hebei experiencing some of the worst floods on record. The record flooding across northern China led provincial authorities to divert water from overflowing reservoirs into populated areas to protect Beijing from the worst effects. This decision to divert the floods, along with the government’s poor preparedness and communications, has fuelled widespread anger that translated into protests, while online, citizens have criticized the prioritization of Beijing and Xiong’an over other cities.
However, criticism towards the government has been widely censored with “spread positivity” content. Instead of addressing the government’s lack of preparedness to handle the natural disaster, and also failing to acknowledge the suffering caused by the floods, the Party’s paper the People’s Daily shared a plethora of positive puff pieces about the heroic deeds and celebrations of all the brave people sacrificing themselves in the service of the Party and the people, for example “Sun Qingbo, Party Secretary of Wanshan Village, Heilongjiang Province, risked his life to save five villagers from the flood.” Indeed, this publication is one in a series of attempts to divert the public’s attention from the government’s inability to handle natural disasters. The devastating earthquake in Sichuan in 2008 –when 69,000 people lost their lives, including 5,000 schoolchildren – is another example. In 2018, the regional government declared that the tenth anniversary of the earthquake should not be a day of memorializing, and instead, it advertised it as a “day of gratitude” for all the “beautiful, clean” new buildings and the “great love” that the country and the Party had shown them following the catastrophe. Therefore, it should come as no surprise that the news of natural disaster management is melted away into pompous statements which are favourable to the government’s image.
SOCIETY & CULTURE
1. Chinese Communist Party’s turn towards quality over quantity
While China’s population seems to be in decline, the Chinese Communist Party continues to enjoy new heights in its membership numbers. According to the CCP’s Organisation Department, the yearly increase in membership in 2022 has reached 1.32 million members. 2021 was an exceptional year: the record increase coincided with CCP’s 100th anniversary and amounted to 4.38 million people joining the party (more than 80% of new members are below 35 years old). While the party is on track to reaching 100 million members, there seems to be an ongoing shift within the party towards an emphasis on membership quality rather than quantity.
The road towards CCP membership is complicated and involves a political screening lasting around two years. While interest in joining the party is still high, China’s youth is facing an even tougher screening process that includes more scrupulous process of information collection about the applicant from places like local communities. Even if a candidate is approved and sworn in, they are still placed on a probation period, and full membership is granted only one year later. This increasingly complex recruitment process reflects the call from CCP leadership to grow a new and ideologically staunch generation of party members, and it can be expected that membership numbers will increase at a slower pace.
