The 20th Chinese Communist Party Congress has consolidated the concentration of power in the hands of the country's top leader, Secretary General Xi Jinping. And as Xi's rule is now further unchallenged, China is turning even more autocratic. How to deal with this outcome? German Chancellor Olaf Scholz will provide a first answer to this question, as on November 4 he will be the first European leader to visit China since the outbreak of the Covid-19 pandemic. Scholz’s trip does not come without criticism: according to the Baltic states, among others, China policies should be an EU prerogative, with single member states following Brussels’ lead. Berlin doesn’t seem to see things the same way: Germany’s automotive industry relies heavily on China, and the government is keen on further strengthening economic relations with Beijing, as shown by the partial acquisition of a terminal at Hamburg’s port by the Chinese company COSCO. Meanwhile, the US is adopting the opposite approach: Washington’s recent moves to step up measures limiting the export of semiconductors to China are a geopolitical and geoeconomic game changer, one that allies won’t be able to ignore in the long run.
Why it matters
- China is more ideological than ever, and so is the global debate around China. China has never been a liberal democracy. However, the smooth transition between Hu Jintao and Xi Jinping in 2012 reassured external observers that the personality cult in national politics had come to an end. Yet, they were wrong. Soon after the 19th Congress, the Party’s ideology abruptly started to revolve around Xi and his thought. Today, the selection of members of the Politburo’s Standing Committee rests upon personal loyalty, rather than expertise or balance among party factions. This new ‘all of Xi’s men’ Party cabinet is a sign that China is determined to do whatever it takes to achieve Xi’s goal of national rejuvenation, that is to ‘make China great again’. The rise of China as an ideological actor will complicate trade relations with other countries. After the 20thParty Congress, doing business with China won’t come without consequences: upholding economic relations with Beijing will more and more likely strain relations with countries and players who are critical of Xi’s autocratic turn.
- Scholz breaks European Unity. Scholz is the first European leader to fall into this trick. He is to visit China for the first time since becoming Chancellor, along with some of Germany’s main companies. Such a move sparked debate for two reasons: firstly, as lamented by the Baltic countries, he is adopting a national approach rather than a European one. Secondly, the war in Ukraine unveiled how risky it is to depend on autocracies. If Russian energy represents the weak point of the German industry in terms of energy supply, China plays a similar role for trade. Even if the German industry confederation BDI had labelled Beijing as a systemic competitor in 2019, other industries are striving to maintain trade relations with the country. Scholz's declaration that ‘decoupling is the wrong answer’ clearly does not reflect Europe’s current stance.
- The US is in full competition mode. The Biden administration has just unveiled its National Security Strategy, declaring that we have entered the ‘age of competition’. These are not just words. The US Department of Commerce launched a set of export limitations to slow China’s semiconductor industry down. Immediately after the decision became public, the Chinese Ministry of Industry and Information Technology (MIIT) is said to have summoned an urgent meeting with the top national companies to assess the damage. Washington’s move will severely affect China’s semiconductor industry.
Our Take
If this century is set to be the Chinese Century or, at least, the Asian one, the ‘Global West’ have to decide how to deal with a no-more-post-ideological Beijing. Washington’s position is clear and has already translated into a strategy to pursue economic and strategic competition, even at the cost of harming critical sectors in the short-term. On the contrary, the European Union is still reeling from the failure of its Russia strategy – the German ‘change through trade’ approach – and hopes that its stance towards China will prove more successful. The US will soon urge Brussels to sideline its approach. Hence, the upcoming months will be China’s last opportunity to persuade Europe to avoid following Washington’s moves.
On the spotlight: export control
Besides the 20th Party Congress, the discussion in the Pacific revolves around the export controls on advanced computing and semiconductors manufacturing the Biden administration has put in place. Other similar measures had been adopted previously by the Bureau of Industry and Security of the Department of Commerce. However, the Biden Administration is not yet done with China: a deal between the US and its allies to limit China’s access to advanced semiconductors and an extension of the restrictions to biotech and artificial intelligence are said to be in pipeline. President Biden’s latest move has three major implications: 1) it directly hits China’s core industry and might trigger some retaliation – the same happened at the time of Donald Trump’s Trade War – with a negative impact on the global economy; 2) it might strain US-EU relations, since there was no previous agreement with Brussels, and it will put the recent EU-US Trade and Technology Council to the test; 3) it will cause distortions in the sectors involved, with yet unknown effects over their global supply chains.
Experts’ views
How to assess the outcomes of China’s 20th Party Congress?
The 20th National Congress of the Chinese Communist Party (CCP) has concluded with certain stark realities brought to the forefront. The continuing lack of any mention of a successor to Xi Jinping has shown the absolute power that he holds within the CCP, and plans to continue holding, potentially into a fourth term. Such overtures highlight a significant move towards a political system historically similar to the one chaired by Mao Zedong and currently comparable to Vladimir Putin’s Russia (if not to North Korea’s Kim dynasty). Xi’s Politburo and Standing Committee are now both filled even more with loyalists. Moreover, younger blood entered into the echelons of Chinese elite amidst continued push on anti-corruption campaigns focused on removing opposition and competition to Xi Jinping’s continued leadership. This absolute control over the CCP, the Central Military Commission (CMC) and Beijing’s various political platforms represents a grave security concern for India and the broader Indo-Pacific area. China will indeed continue with its ‘wolf-warrior diplomacy’, made of assertive action over contested land-maritime territory and unilateral economic regional modelling. All of these will deeply affect the core democratic interests of neighbouring countries.
Dr. Jagannath Panda, ISPI Associate Research Fellow and Head, Stockholm Centre for South Asian and Indo-Pacific Affairs, ISDP
What to expect from Scholz’s visit to Beijing?
Chancellor Scholz’ upcoming visit to Beijing is bad news for Western unity on China. It means that the current coalition government cares more about its economic and trade relations with China than about a unified Western/ EU approach. It is not a positive development following the CCP party congress, which completely lacked any sign of opening towards the EU. Over the past five years, the European Union has been trying to build a coherent China policy, with some success (a screening mechanism on Foreign Direct Investment introduced in 2020, procurement and anti-coercion instruments, recent provisions on EU companies acquiring products made with forced labour, etc…). In 2019, the EU launched its “triptych” calling China a ‘partner, an economic competitor and systemic rival’ which still represents the state of affairs. Perhaps the systemic rivalry is now on top of this list. There are obvious concerns in the rest of Europe about Mr. Scholz – who does not chair the EU Council – choosing to put German industrial interests above the EU’s values and interests, especially because he is to travel along with a delegation of German companies. The EU unity should not be compromised, especially if Berlin tries to rediscuss the Comprehensive Agreement on Investment (CAI). Signed in December 2020 by China and the EU, such agreement was never ratified by the European Parliament, due to a set of sanctions imposed in the following months by Beijing on Parliamentarians, diplomats and academics.
Philippe Le Corre, Research Fellow, Harvard Kennedy School
What and where
Tensions rising in the Korean Peninsula
On November 2, North Korea fired 25 missiles off its coasts, the highest number registered in a single day, with one of the missiles landing 60 km off the South Korean coast. A missile almost reached Seoul’s territorial waters for the first time since the Korean war. The firing of missiles continued, including the suspected launch of an intercontinental ballistic missile (ICBM), which failed in flight. The past months had already seen tensions rising between the two Koreas. As part of its new missile campaign that started in September 2021, the North Korean regime has been testing at an unprecedentedly high frequency. On the other hand, South Korea’s President Yoon Suk Yeol has pledged to respond ‘sternly and promptly’ to every provocation since the outset of his term. Following this series of missile tests, Pyongyang might feel confident enough to conduct its seventh underground nuclear test since 2017. Should this happen, South Korea, Japan and the US have promised to respond with an ‘unparalleled scale’. Yet, the burning question is how China and Russia will respond to Pyongyang’s new nuclear test. So far, Beijing and Moscow have vetoed any further multilateral sanctions against North Korea, arguing that the country is acting in response to the American expansion in the region. Kim Jong-un upheld a similar narrative, stating that his tests are a response to South Korea, Japan and the US military exercises and their harsh criticism of his leadership. As Kim Jong-un shows no signs of backing down, voices grow stronger to provide South Korea with its own nuclear deterrent. As of now, this is a very remote possibility, although it cannot be completely dismissed in a more and more confrontational international environment.
Myanmar remains under Junta’s control, but fighting continues
On the 12th of October, a military-controlled court charged former State Counsellor of Myanmar Aung San Suu Kyi with corruption and sentenced her to an additional three years in prison. The democratic leader now faces 26 years of confinement. By detaining the leader who embodied Myanmar’s hope for democratisation, the junta intended to strike a blow to the rebels. However, the conflict continues throughout the whole country. The Kachin Independence Army (KIA) accused the national military of bombing a concert organised in the Kachin State to celebrate the anniversary of the Kachin Independence Organization. 80 people are reported to have lost their lives. The Kachin rebel army fought both against the Aung San Suu Kyi government and the military junta over the autonomy of its territories, and it is supportive of other groups opposing Myanmar's military. After the coup, several ethnic armed organizations welcomed and trained civilians willing to oppose the military junta. With both the rebel groups and the Tatmadaw engaged in the conflict, it is unlikely to see peace gracing the country anytime soon.
Malaysia gears up for elections
The electoral campaign in Malaysia will officially kick off on the 5th of November. Malaysians will choose their federal representatives after two weeks, on the 19th of November. All 222 seats of the Dewan Rakyat – the Malaysian lower house of Parliament – are up for grabs. The current government under Prime Minister Ismail Sabri Yaakob was supposed to last until September 2023, but a protracted political crisis forced the administration to call for snap elections. The new parliament is expected to end the country’s political instability after three different PMs took charge since the previous federal elections in 2018. Malaysians are worried about rising prices and costs of living and wish for some political stability. Three broad coalitions are ready to take on the challenge: the Barisan Nasional (BN), which has ruled lengthily in the past; the Pakatan Harapan (PH), which was awarded premiership in 2018, and the Perikatan Nasional (PN).
Look out for Vietnam
Vietnam’s Communist Party leader, Nguyen Phu Trong, will be the first state official to meet Xi Jinping after the 20th Congress. This visit is a demonstration of solidarity and a sign that Trong wishes to keep up healthy relations between the two countries. However, Vietnam is not a pawn. Despite remaining dependent ontrade with Beijing, the country has evolved into an independent manufacturing hub, attracting consistent inflows of foreign investments. With labour in China becoming more costly because of the improved economic situation, many firms tried to relocate to countries offering cheaper manpower. Vietnam is presenting itself as a good alternative, especially after its expansion into the tech sector. In time, the country could turn into a key player in the global electronic supply chain and a contender for China’s spot as the world’s manufacturer. Moreover, Vietnam is also trying to deepen its economic relations with the United States, China’s strategic rival. Vietnam has so far maintained a more detached approach with regard to great power competition, recognising both its ideological closeness to China, and the security and economic benefits stemming from trade relations with the US. During Trong’s four-day visit, China will try to strengthen its ties with Hanoi.
Looking ahead: green transition in SE Asia
According to the IEA Southeast Asia Energy Outlook 2022, the region needs to strengthen its efforts to meet the climate goals agreed upon at Cop21, Paris 2015. In the past twenty years, the region’s energy demand increased every year by around 3%. Its economy is predicted to grow around 5% per year until 2030, and around 3% during the following years. Current scenarios based on existing policies estimate that by 2030 fossil fuels, mainly imported from the Middle East, will meet up to 75% of energy demand. If the region adopted a Sustainable Development Scenario (SDS), renewables such as wind- and hydropower, non-fossil fuels, could provide up to 45% of power generation by 2050. The promotion of renewables would also provide remote areas with energy capacity, easing significant distress. Business-as-usual policies would require an annual energy investment of $130 billion, while sustainable ones need $190 billion per year.
What we are reading
- Xi Jinping the III: Ruling Through the Pandemic and Isolationism
- An Alternative Supply Chain in India? Taiwan’s Experience
- The bumpy road ahead in China for Germany's carmakers
- China’s Gradual Reform Dilemma
- ‘North Korea has already won’: US urged to abandon denuclearisation ‘farce’
