US-China competition certainly is among today’s most noteworthy trends in international politics. The relationship between the two countries has yet to level off, as it is subjected to regular political pushes from each side. One year ago, US President Joe Biden gathered tens of countries for the Summit for Democracy, an attempt to frame international relations as a competition between autocracies and democracies. The rift between China and the US became blatantly evident after the establishment of a “no-limits friendship” between Moscow and Beijing and the subsequent Russian invasion of Ukraine. However, along with Xi Jinping’s return to performing state visits abroad since June, China has dismissed the ‘autocracy vs. democracy' narrative and persuaded the Global South and European nations that this narrative is not worth its economic cost.
Why it matters
- The US frames the relationship on values. The Summit for Democracy represents a significant episode in the US’ shifting attitude towards China. A relationship based on values – even if well grounded – reduces the room for cooperation, if the “other” does not adhere to them. When Xi Jinping and Putin agreed on their no-limits partnership with the aim of challenging the US-led liberal world order, the divisions among strategic bloc appeared set. Furthermore, in May, President Biden visited East Asia and launched the Indo-Pacific Economic Framework (IPEF), an agreement that explicitly aims to limit China’s capability to make rules in the region. The signatories of IPEF are not only the US’ traditional allies like Japan, Australia or South Korea, but also include the seven most advanced economies of the ASEAN, India, and even Fiji, right at a time when China was attempting to bolster its influence in the Pacific Islands.
- The BRICS are not only Moscow and Beijing. A significant change of this narrative happened during the BRICS Summit hosted (virtually) by the PRC. This marked the start of a process to enlarge its membership – which is currently made up of Brazil, Russia, China, India and South Africa – by welcoming other countries, such as Argentina, Iran, and Algeria, which have all sent formal requests to join right after the Summit. In addition, it is noteworthy that India – a relevant actor in the US’ Indo-Pacific Strategy – decided to not review its participation with a group including Russia during the climax of the war in Ukraine. This was a fracture in the democracies vis-à-vis the autocracies united front.
- Xi is finally traveling: first stop, Central Asia. After more than two years of self-imposed isolation due to the measures to prevent the spread of Covid-19, Xi Jinping traveled to Central Asia in September for a State Visit to Kazakhstan and for the SCO Summit in Uzbekistan, where he met with Putin. This visit clearly indicates that Central Asia is one of China’s priorities in foreign affairs. In addition, it restarted bi-lateral diplomacy.
- APEC and G20: Xi’s charm wins the West back. If the previous meetings allowed Xi Jinping to encounter long-term friends, the G20 in Bali and the APEC summit in Bangkok were a chance for Xi to reconnect with Western leaders, including Biden, Macron, Meloni, Sanchez, and others. Those bilateral meetings were anticipated by German Chancellor Olaf Scholz’s visit to Beijing right after the 20th Party Congress of the Chinese Communist Party. The message emerging from all those meetings is that European countries are not ready to bear the economic cost of decoupling from China.
- “An epoch-making milestone in the history of China-Arab States relations”. After restarting relations with its “systemic rival” – the expression the EU chose to define China in 2019 –, Xi Jinping revamped his country's partnership with Saudi Arabia and the other Gulf Countries. This trip was a watershed moment for the attending leaders, as it might represent the Gulf Countries’ own Pivot to Asia. There are two reasons for this: 1) China and Asia are the biggest export markets for oil, and their demand will increase over the next decades 2) Gulf countries do not feel comfortable with the “Democracies vs. Autocracies" dichotomy since they are predominantly autocracies.
Twelve months ago, Joe Biden presented the autocracies vs. democracies narrative to the world. Six months ago, the launch of Indo-Pacific Economic Framework might have represented the end of a process that resulted in several diplomatic initiatives in the Indo-Pacific seeking to counter China. However, Xi Jinping managed to avoid the setbacks of the “autocracy” label and proved that China’s global consensus is not fading – even though the Belt and Road Initiative is losing its attractiveness –, especially in the Global South and countries with strong economic connections to China. Still, it is too early to say the ‘democracy vs. autocracies' narrative is dead. European and East Asian democracies understand the risks of relying too much on China and are probably buying time to face the current global economic uncertainty. However, it is likely that in the medium term they will act to significantly reduce their exposure to China.
Spotlight: Covid in China
After the protests earlier this month, Covid-zero stringent restrictions were partially lifted but mounting fear among the population remains. The Chinese chief epidemiologist announced that three possible waves of covid will hit the country during winter. The zero covid policy managed to keep cases low in China over the past years, but this means the population has yet to come into contact with the virus and develop “herd immunity”. Having gone from restrictive measures to none and after years of propaganda about how dangerous the virus is, citizens are now afraid of the possible effects of the incoming waves. As the number of reported cases remains high, many cities are left empty despite the lack of restrictions – a stark contrast to the images of protests a few weeks ago. The population worries about the availability of medicine in case of another spike in covid cases while the government is pushing for citizens over 60 to get a booster shot. The manufacturing sector is also struggling: many industries are facing a labor force shortage as many workers test positive, thus slowing production. This could severely impact China’s position as the center of the world’s supply chains. Repealing the zero-covid policy was long overdue but it might have been too sudden: the government now must quickly prepare itself to coexist with the virus to keep its manufacturing sector running.
Why is Xi's visit to Saudi Arabia relevant?
China and Arab states share common interests in promoting the establishment of a multipolar world order and a new governance model. The China-Arab Summit reflects such determination and unity of developing countries to seek to establish a more just and reasonable international order, enhance the representation and voice of developing countries in global issues, and replace the game of great powers with inclusive development and global cooperation. Arab states refrain from choosing sides between the United State and China, while between U.S.-style moralizing and Chinese-style pragmatism, they have clearly chosen the latter. Meanwhile, a rising sense of strategic autonomy of U.S.’ Arab allies is shifting their approach to addressing their own security concerns toward reducing reliance on foreign suppliers, easing tensions in the region, and developing more diversified security cooperation with China and other Asian states, and this could be a lengthy process.
Bao Chengzhang, Middle East Studies Institute, Shanghai International Studies University
The recent China-Arab summits were called milestones. But relations between the two have been advancing for years; China has been KSA’s largest trading partner since 2013. On the geostrategic front, China, with the US in mind, seeks to secure key choke-points in the sea lanes of communication such as Bab-el-mandeb and the Straits of Hormuz. Although China values Iran as a civilization and as the only anti-US country in the Middle East, the gulf offers immediate benefits as a major investor in China and recipient of advanced technology as part of China’s digital silk road. By deepening business and tech ties while discussing energy transactions in rmb, both the KSA and Beijing are also sending a message to what has been seen by the Gulf as an unreliable US. While many countries feel they have little agency in the great power rivalry, Saudi Arabia is a good example of a country using US-China tensions to advance its interests.
Carice Witte, SIGNAL (Sino-Israel Global Network & Academic Leadership)
Xi’s visit to Saudi Arabia was both a milestone in Sino-Saudi relations and a win for all parties except Iran. China got much closer to the Gulf Arab states, furthering its effort to build its presence in this critical region beyond that of a major energy customer. It has built a framework for extensive and growing ties with Saudi and other GCC states on a range of investments, research and development, cooperation and infrastructure building on, or extending, the Belt and Road Initiative. This was underscored by the reciprocal recognitions of the Chinese claim in Taiwan and the UAE’s on three disputed islands in the Persian/Arabian Gulf. That is more evidence that Beijing considers Tehran too dependent to object and ultimately of less importance than Gulf Arab countries. Importantly, none of this especially alarms the United States, which has accepted that Gulf countries like Saudi Arabia and the UAE are no longer de facto protectorates of Washington but emerging mid-level powers that will share more of the security burden and develop relations with rivals like China, just like US allies in Western Europe. Nothing that’s known about the Sino-Saudi agreements violates any US red lines, which would be anything unduly providing China with significant new security and intelligence footholds in the Gulf region. So Saudi Arabia and China develop their mutually advantageous relationship beyond buying and selling energy, and neither of them wants Iran to have an exclusive relationship with China. Washington, too, has an interest in a carefully managed expansion of Beijing-Riyadh ties that will complicate and undermine the most dangerous aspects of a maturing partnership between China and Iran. Hence, the only real loser in this scenario is Tehran.
WHAT AND WHERE
Protests in Mongolia
Starting on December 5th, protestors shook up Mongolia’s capital Ulaanbaatar. People took to the streets after corruption allegations regarding state-owned mining company Erdenes Tavan Tolgoi (ETT) were made public. EET is one of the biggest coal-mining companies in a country that depends on this sector. The firm is accused of having allegedly stolen and exported 385,000tons of coal from the state’s stockpiles likely to China. The Mongolian population, a large part of whom live in poverty, is infuriated by corruption and under the counter deals regarding natural resources. Exasperated citizens started protesting and lamenting the country's problems, such as rampant corruption, high commodity prices – inflation reached over 14% in the past months – and lack of opportunities for young people. To quell the protest, the Mongolian parliament declassified many ETT projects and is pushing to list the firm as public. However, state efforts are not enough for the protesters: they are calling for the government to stop the “coal mafia” in the country and end corruption.
The first EU-ASEAN summit took place on the 14th of December in Brussels. The 27 EU heads of state and the 10 leaders of the Association of Southeast Asian Nations (Myanmar’s military junta was not invited) discussed the future of the grouping. While the European Union is one of the biggest economic powers globally, the ASEAN region will record one of the highest GDP growth rates in the world with a 5% average. While the ASEAN is the EU’s third largest economic partner, only Vietnam and Singapore have free trade agreements with it. The EU is taking its first steps towards increasing partnerships with Southeast Asian countries. Von der Leyen announced funding from the Union of €10 billion for the green, infrastructural and digital development of the region under the Global Gateway. Creating a free trade agreement involving both blocs would be a step forward in EU-ASEAN relations but are the Southeast Asian countries willing to accept the EU's stringent regulations?
Japan's new national security strategy
In its recent National Security Strategy (NSS), announced on Friday 16th December, Japan decided to increase its defense budget spending ¥43 trillion (around $313 billion) between 2023-2027. This would account for 2% of the country’s GDP thus doubling the previous budget. Recent international tensions pushed Japan to abandon its long-standing defense-oriented doctrine. In fact, China’s provocative actions in the South China Sea, the war in Ukraine, and North Korea’s recent onslaught of missiles that often fall in Japan’s territorial waters, culminated inTokyo bolstering its defense forces. In the text, China, Russia and North Korea are identified as the major threats to international security that Japan and its partners will have to face in the coming years. While the United States has welcomed this change, China and North Korea have not. As a possible retaliation for the NSS,North Korea fired two more ballistic missiles in the waters between Japan and South Korea while Beijing sent its navy through the waterways around Japan. The new NSS has the potential to alter the equilibrium in the Indo-Pacific, since a stronger Japanese military can threaten China, especially if Kishida manages to maintain good relations with the other powerful armies in the region like the US, South Korea, and India.
US-China chip war
Semiconductors have dominated international competition since the start of the pandemic with many countries adopting national strategies to protect their domestic production and supply chains. However, in recent months, the United States upped the stakes by restricting semiconductor exports from the US to China and preventing ‘US persons’ from working for certain Chinese chipmakers. An increasing number of Chinese firms fall under the entity list – which prevents US companies from selling sensitive products to China without a license – hurting their business. On December 12, Beijing struck back with a trade dispute at the WTO, contesting US’s ban on chip exports. President Biden escalated matters by calling for the US’ allies to take similar initiatives, with mixed responses. After holding talks with Japan and the Netherlands on chip restrictions to China, both countries appeared in line with the US. Others, like Israel, are concerned about the chip war. Several Israeli start-ups are deeply intertwined with US firms but export products both to the US and China. They are now worried that the restrictions will affect their businesses and are applying for the license needed to keep trading with China. Economy and politics are becoming indissoluble, and countries find themselves divided between choosing political or economic interests.
Trend: oil and natural gas demand
While international leaders commit to reduce the environmental impact of their countries, oil and natural gas demand remain high. And demand is projected to increase in the Asia-Pacific region: demand for oil is expected to be four times higher than that of Europe. The demand for natural gas, on the other hand, will be double that of Europe in 2030 and 2050 according to IEA scenarios. While this data seems surprising, considering the level of industrialization in Europe, it is important to remember that the Asia-Pacific region is home to 60% of the world's population. Furthermore, while the European population is expected to decrease in the coming decades, the Asia-Pacific region is expected to increase thanks primarily to China and India. Another factor that can explain the difference in future demand is that the green transition in Europe, particularly in the Scandinavian countries, is developing much faster than in Asian countries, likely reducing European demand for fossil fuels. In the Asia-Pacific region, China will amount to almost half the demand for oil and gas , but the Southeast Asian countries and India will also contribute with the demand for oil and gas set to rise in 2030 and 2050. However, Japan is different since it is a small country with little demand, when compared to that of China and the United States, that has pledged to drastically reduce its oil and gas demand.