US National Security Strategy | Semiconductors | GER/UK-China relations | 20th Party Congress
Welcome to the very first edition of Sinification – a newsletter focusing on foreign affairs as viewed from China. Its main goal will be to provide a weekly round-up of key insights from Chinese think-tank and academic circles on a range of timely international topics.
This week’s edition looks at the following issues:
US National Security Strategy: Experts from the Chinese think tank Shanghai Institutes for International Studies (SIIS) comment on its implications for China.
US/Europe-China: Xu Mingqi sees opportunities for his country as risk of stagflation increases in the US and Europe.
Semiconductors: Liao Lei and Wang Yaonan provide Beijing with a set of policy recommendations (pre-US export controls).
UK-China: Li Guanjie’s warning to Britain were it to follow through with its plan to formally designate China as a “threat”.
Germany-China: Wu Huiping discusses Germany's so-called geopolitical turn.
20th Party Congress: Zhu Feng on the importance of “China's voice” in the context of great power diplomacy.
1. Chinese experts react to the U.S.’s National Security Strategy
On 14 October, the influential Chinese think tank Shanghai Institutes for International Studies (SIIS) brought a panel of its experts together to comment on the US’s newly released National Security Strategy. Below is a selection of their opinions:
Shao Yuqun (邵育群) – Director of the Hong Kong, Macau and Taiwan Institute at SIIS:
“The China-related sections of the National Security Strategy is a reflection of the Biden administration’s overall approach to [the US’s] China strategy and policies since coming to power. Thus, there is a fair amount of content that we are already very familiar with. There are nevertheless some new formulations and policy nuances in the report that deserve our attention.”
“The first is the reference to ‘out-competing China’.”
“The second is the use of the term ‘decisive decade’. The Biden administration has made it clear that the next ten years will be a crucial phase in the US’s competition with China and will determine whether or not the US can win this competition … This timeframe is important for us in terms of gauging the US’s short- to medium-term policy trend vis-à-vis China.”
Wang Guoxing (王国兴) – Distinguished research fellow at SIIS:
“This report is merely a summary and refinement of the national security strategy (including its strategy towards China) implemented by the Biden administration since it took office”
“[The US] wants to unite its allies and partners, but at the same time it wants to be the boss of everything and claim all the benefits of the 21st century. These contradictions are the reason why, despite its determination, it is unclear whether the US’s objectives will be achieved.”
Wang Zhongmei (王中美) – Director of the Institute for International Economic Studies at SIIS:
“The core of the US’s economic policy towards China is becoming increasingly clear. It exhibits two obvious objectives: The first is to curb the development of key industries in China … The second is both to restrict China's ability to improve its standing within its regional economy (在地区经济领域), while accelerating the reshaping of supply chains based on ally-shoring’”
Su Liuqiang (苏刘强) – Assistant research fellow at SIIS’s Institute for International Strategy:
“The US’s new National Security Strategy largely inherits the strategic vision of the past two US administrations, with its strategic objective still being to preserve US hegemony.”
Sun Haiyong (孙海泳) – Associate fellow at SIIS’s Institute for Comparative Politics and Public Policy:
“With regard to Sino-foreign cooperation in science and technology, the Biden administration's first National Security Strategy greatly emphasises the so-called geopolitical threat posed by China and significantly increases its strategic readiness to ‘compete’ with China.”
“In the medium to long term, this strategic orientation taken by the US will, on the one hand, inject more momentum into the Chinese tech industry’s push towards independent innovation, while on the other, the US will suffer the backlash effects of its tech-related bullying strategy.”
Zhao Long (赵隆) – Deputy director of the Institute for Global Governance at SIIS:
“In terms of [its Russia-focused] objectives, the two main priorities of ‘weakening and isolating’ and ‘deterring and dividing’ [Russia] have been reinforced. [The National Security Strategy] proposes to enhance the US’s integrated deterrence capabilities, to use the US’s alliance network to continuously weaken Russia and to try to turn the Russian government and people against each other.”
Zhang Yinghong (张迎红) – Director of the Centre for European Studies at SIIS:
“First, the US [now] considers the systemic competition between democratic and authoritarian states as one of the main trends in international relations”
“Second, the United States emphasises the linkage between Europe and the Indo-Pacific region and the construction of a large Eurasian security block”
“Third, the United States is set to strengthen NATO. [As a result,] Europe's strategic autonomy will be seriously affected. In the next ten years, Europe will become mired in the long-term geopolitical conflict opposing the US and Russia. The long-term energy shortages and long-term economic recession will lead to Europe's heavy dependence on the US in terms of security, energy, trade and international governance. The confidence and ability of Europe to pursue its strategic autonomy is likely to be severely undermined.”
Liu Zongyi (刘宗义) – Secretary-general of the Centre for China-South Asia Cooperation at SIIS:
“The Biden administration's new National Security Strategy is a summary of its domestic and foreign policies of the past two years, with relatively little that is new”
“From both a geopolitical and a geo-economic perspective, ASEAN is [now] at the heart of the struggle between the US and China. Vying for the moral high ground through public opinion and information warfare is one of the main aspects of this competition.”
Zhou Yuyuan (周玉渊) – Deputy director of the Centre for West Asian and African Studies at SIIS
“[The US hopes to] focus on rule and standard setting and to establish a comparative advantage over China [in Africa] by setting new standards, adopting new discursive methods and [trying out] new approaches”
“[However,] the US has also indicated that it will cooperate with other protagonists [in Africa] – including rivals – in addressing Africa's development challenges such as food security, epidemics, terrorism and humanitarian crises.”
Mao Ruipeng (毛瑞鹏) – Deputy director of the Center for the Study of the Americas at SIIS
“The US’s new National Security Strategy reinforces its strategy of both competing with China and strengthening its international alliances, arguing that strategic competition between major powers over the [current] international order has become a new feature of the times.”
“According to the report, the US will increase its participation in international organisations and will seek to strengthen its system of alliances in a variety of different fields in order to be able to dominate international rule-making.”
2. Xu Mingqi sees opportunities for China as risk of stagflation increases in the US and Europe.
The following is an abridged version of Xu Mingqi’s contribution to a seminar entitled “China and the World before and after the 20th Party Congress – Regional Economic Cooperation and China's Neighbourhood Diplomacy”.
Xu Mingqi (徐明棋) is a respected scholar in China and the current vice-chairman of the Shanghai Centre for International Economic Exchanges.
His contribution to this seminar was entitled "Thoughts on China's Economic and Diplomatic Strategy in the Context of Rising Geopolitical Tensions and the risk of Global Stagflation".
Below are some of his remarks and policy recommendations for China:
“Although geopolitically and ideologically the US and Europe are tough when it comes to confronting and competing with China, they also want China to improve its market access and increase its level of openness in trade and finance so as to provide more business opportunities for US and European companies. Thus, the likelihood of the US engaging in talks with China on economic and trade-related issues will increase after the US mid-term elections.”
“[In future,] we will see rifts within the US and Europe. [On the one hand,] politicians and parliamentarians will be even more unfriendly towards China and will use even more aggressive rhetoric. [On the other,] companies and multinationals will strive both to maintain stable economic relations with us and to avoid criticising China despite being under the pressure of [western] ‘political correctness’. This will become more evident as stagflation deepens and lengthens [in the US and Europe]. In the short term, it is unlikely that the US and European governments will lessen their political pressure on China simply because of their stagflationary economies, but those voices in the US's economic and business circles that oppose and lobby against decoupling from China may [well] increase. This may provide the impetus for the US, and especially European countries, to fine-tune some of their economic and trade policy measures towards China. This could include loosening restrictions on Chinese investments and exports of certain non-core high-tech products. This is a positive factor that we should make full use of.”
“US and European politicians continue to vilify China and treat it as an imaginary enemy for the sake of both political manipulation and catering to the general public’s [anti-China] bias. But the objectively close trade and investment relationships of the US and Europe with our country is unlikely to change rapidly despite politicians pushing for more ‘decoupling’. Even if politics were to have a significantly negative effect on the economy, this process would cause US companies to suffer losses. Therefore we should continue to work hard to help raise those more rational voices of US and European companies keen on maintaining and preserving trade and investment ties [with China]. [For example,] some firms, such as Volkswagen and BASF, have recently tried to persuade the German government to be [more] cautious in its approach to China.”
“[We should] take advantage of the stagflation in the US and Europe to increase investments in, and imports from, our neighbouring countries so as to: (i) further strengthen economic interdependence between these countries and China; and (ii) keep in check the US's attempts to contain China through its Indo-Pacific strategy and Indo-Pacific Economic Framework.”
“[We should] raise the level of cooperation within RCEP and further benchmark against the CPTPP’s greater market openness and higher standards (environment, labour, anti-corruption, fair trade, unfair competition, subsidies, etc.).”
“[We should] further strengthen the economic functions of the Shanghai Cooperation Organisation (SCO). For example, FTAs and bilateral investment agreements should be promoted in addition to the SCO’s important geopolitical and security functions.”
“[We should] respond calmly and positively to the proposals and policy initiatives of the US and Europe on issues of global governance, reform of international institutions and provision of public goods. The US’s policies on many global governance issues are implicitly aimed against China and at weakening China's influence [in the world]. In spite of this, and in order to unite a majority of countries around the world (including the EU), we should adopt a common position on, and respond positively to, some of these issues in consultation with BRICS countries and other emerging markets, as long as these issues are not explicitly aimed against China.”
3. US-China semiconductor competition: Liao Lei and Wang Yaonan provide Beijing with a set of policy recommendations
The following article by Liao Lei and Wang Yaonan was published last month in The People's Tribune – a magazine affiliated with the People's Daily. Despite its having been written prior to the US’s most recent high-tech export controls, its policy recommendations are noteworthy.
Liao Lei (廖蕾) is the director of the School of Semiconductors at Hunan University and Wang Yaonan (王耀南) is a member of the prestigious Chinese Academy of Engineering.
The title of their article can be loosely translated as “How to reach breakthroughs in China's chip industry” (“中国芯”破局之路如何走). Below are key excerpts:
“Overall, the US government's crackdown [on the development of China's semiconductor industry] through tariff increases, expanded export control lists, corporate shareholding restrictions, controls on R&D exchanges and scientific cooperation etc. will not only pose a series of difficult-to-manage and unpredictable risks to the development of China's semiconductor industry, but will also have a huge negative impact on China's ability to achieve technological autonomy.”
“China's chip industry chain is relatively fragile. If a link in the supply chain were to be broken, our industry would be at the mercy of others [就会被他人’卡脖子’] and our chip industry as a whole would be forced into a passive state. [Such a scenario] might even end up threatening China’s economic and social development.”
“We should [therefore] proactively build a chip industry supply chain that is both autonomous and controllable ... This will help reduce the possibility of partial or total supply chain collapse in the face of disruptive factors. At the same time, we should reduce our dependence on chip technologies and products from non-friendly countries, regions and firms, so as to allow our national chip industry to achieve technological self-reliance.”
“We should establish an early warning prevention mechanism to deal with the risks faced by the semiconductor supply chain"
“China needs to continue to raise the strategic status of its chip industry, encourage local government departments to introduce a series of preferential policies to support the development of the chip industry, and rely on innovative chip enterprises to plan and build a number of national integrated circuit [hereafter IC] technology R&D centres. Our country needs to guide those enterprises that are in a position to do so to proactively increase their research and investment in high-end technologies.”
“We should also improve the construction of our innovation system, with the National Enterprise Technology Centre as a hub, and guide the innovation-driven transformation and development of the industry. At the same time, our country should increase its financial support and subsidies for the chip industry by providing chip enterprises with tax incentives, R&D subsidies and investment from our National Semiconductor Industry Fund, while making occasional adjustments to corporate income tax and VAT according to the state of technological progress of [our] enterprises."
"We should help businesses from the chip industry to raise funds flexibly through intellectual property pledges, equity pledges and insurance guarantees, and give full play to the role of financial institutions in providing financing guarantees.”
“Only through the overall coordination and alignment of the government and the market to achieve resource integration, division of labour and industrial integration cooperation in the upper, middle and lower reaches of the chip industry’s supply chain will we be able to provide a solid foundation for the optimal development of China’s industrial structure.”
“Talent is the cornerstone of high-end technology. We should improve the mechanisms for nurturing domestic IC talent; further strengthen the cooperation between IC enterprises, universities and research institutes; carry out the construction of dedicated bases for the training of such talent; dynamically adjust curricula and practical hands-on methods in close conjunction with both enterprise development and market demand; focus on training advanced and interdisciplinary talent; and promote the close integration of manufacturing, education and the forefront of science and technology.”
“In order to solve the [huge] shortage of talent [in China] and speed up the training of new talent, the state has approved the categorisation of integrated circuit science and engineering as first-class disciplines and more than ten new undergraduate university courses focusing on ‘integrated circuit design and integrated systems’ have been opened. Tsinghua University, Peking University and others have, one after the other, set up integrated circuit departments. It is worth noting that an innovative national talent training system is now being established alongside an environment designed to foster individual development in order to support the rapid development of China's IC industry. However, the chip industry’s talent training cycle is a particularly long one”
“We should establish an effective incentive system for scientific and technological innovation as well as honour and reward top talents who have made outstanding contributions to the development of ICs"
"Guided by major national IC needs, we should launch a national research and exploration plan for major scientific projects and proactively promote the process of upgrading domestic chip designs and manufacturing"
“[We should] encourage outstanding overseas researchers from IC enterprises and key universities to return to China to engage in chip-related research and manufacturing."
"When they return to China for employment or to start their own business, these core-tech highly skilled individuals from the chip industry will be able to bring back with them advanced technologies, rich experience and industrial resources which will help with the development of our chip industry”
“In recent years, although the US has backtracked on the path towards international cooperation and blocked almost any technology-related cooperation between Chinese and US chip companies, the willingness of some US companies to help China proactively negotiate with the US government in an attempt to continue formerly established tech-related cooperation … is closely tied to China being their main source of revenue”
“We need to fully exploit the opportunity presented by those chip companies representing US capital and their associated groups and consortia who seek to influence or change US government decisions through lobbying and other means in order to safeguard their own interests.”
“[We should also] take the initiative in expanding international cooperation and maintain close ties with important chip companies from South Korea, Japan, Israel, the European Union and other countries as well as regional organisations, and gradually narrow the technological gap with the world's leading [chip] firms.”
4. UK-China relations: Li Guanjie’s warning to Britain were it to follow through with its plan to formally designate China as a “threat”.
The recent upheavals in British politics have been the source of both ridicule and concern in China. With Liz Truss’s decision to resign on Thursday, it remains unclear whether or not Downing Street will follow through with its plans to formally designate China as a “threat” to Britain.
In a recent opinion piece published in China’s fiery Global Times, Li Guanjie (李冠杰), a researcher at the Centre for British Studies of Shanghai International Studies University, warns the UK of the potential consequences that such a move might entail. Below are some excerpts:
“Populist thinking within the UK has derailed Britain’s long-standing pragmatic and effective foreign policy. This has been to the great detriment of the UK.”
“On the one hand, the UK uses values-based diplomacy to bring together like-minded countries to form a so-called ‘coalition of democracies’. On the other, it constantly defines its ‘opponents’ in terms of values in order to create opposites. The UK’s goal is to create two irreconcilable camps within the international community.”
“Conceivably, London’s attempt to label China as a ‘threat' to the UK could be [viewed as] a tentative move by Truss’s cabinet to appeal to Conservative backbenchers in the House of Commons on the one hand and to strengthen unity within the Conservative Party on the other.”
“If Truss were only to talk tough on China and not steer Britain towards actual confrontation with Beijing, she could still be regarded as a prudent leader [by China]. But if she were to change Britain’s relationship with China in substance, Britain's national interests would suffer greatly.”
"Sino-British economic and trade relations would be severely affected ... If the UK government were to classify China as a 'threat', its economic and trade relationship with China would undoubtably be set back."
"In 2020, the UK became the number one overseas destination for Chinese students. If the UK were to classify China as a ‘threat’ and create man-made barriers to block exchanges, this would hurt the respective feelings of the Chinese and British people. [If this were to happen], the space for cultural exchange would end up being filled by other countries such as the US, thereby seriously damaging the UK's overall power in the long term."
5. Sino-German relations: Chinese scholar Wu Huiping discusses Germany's so-called geopolitical turn.
In a recent article for the German think tank MERICS, I highlighted the uncertainty that now characterises Chinese assessments of Berlin’s strategic positioning vis-à-vis both the PRC and the US. In the following piece entitled “Germany is ‘awakened’ by the war and now understands the importance of hard power”, Wu Huiping (伍慧萍) – deputy director of the Centre for German Studies at Tongji University – offers some additional insights into how Germany's so-called geopolitical turn is perceived in China:
“[Germany] has started talking about becoming an important military force and assuming greater leadership both in the EU and even in the world. Currently, these ideas are not perceived as a threat by Germany's allies. With the example of Germany’s recent focus on obtaining a permanent seat on the UN Security Council, Germany's sense of leadership is gradually being aroused.”
“It is true that there are differences within Germany on how to conduct relations with China. More specifically, the SPD’s approach, including that of Chancellor Scholz, is relatively stable and tries to maintain a more Merkelian and pragmatic tone towards China. However, the Greens and the FDP put more emphasis on systemic competition. That being said, we can see that Germany's [recent] adjustment of its China policy is very clear. The geopolitical focus of its approach to China emphasises systemic competition.”
“German capital is being redirected to other regions [i.e. outside China]. Nowadays, there is a new term called ‘friend-shoring’, which means directing German capital to what they consider to be ‘friendly countries’ or places with similar values. But this approach is extremely hypocritical since investments in India and Saudi Arabia can [also] be regarded as ‘friend-shoring’”
“The [German] political class is desperately pulling back and trying to dissuade German companies from investing elsewhere [i.e. in China], but I’m afraid to say, [German] companies still value the Chinese market, not to mention that it is not that easy to find a similar alternative market these days.”
“In the past, Germany used to focus on developing its cultural soft power, using the power of values to expand its international influence in a flexible way. But this vision now seems too idealistic. The Germans will [soon] be shocked to find themselves once again entering an era of great power competition, where military deficiencies remain a great weakness.”
6. 20th Party Congress: Zhu Feng on the importance of “China's voice” in the context of great power diplomacy.
With China’s all-important 20th Party Congress having just come to a close, I felt I could not end this first edition of Sinification without addressing at least one article from the mainland that touches upon some of the foreign policy messages contained in the Congress’s final report. The following are excerpts from an interview with Zhu Feng that both Tsinghua and Fudan University have been promoting over the past few days. Zhu Feng (朱锋) is the director of the School of International Relations at Nanjing University. His comments remain relatively general and aimed at a wide audience. More detailed takes will hopefully follow.
“The report points out that ‘the world is once again standing at the crossroads of history’. This is a very important and relevant statement. The world’s current political and economic climate is undoubtedly the most serious and turbulent since the end of the Second World War 77 years ago.”
“Certain countries, guided by their hegemonic status and unipolar hegemonic interests, are putting obstacles in China’s way in such areas as science and technology, market opening and free competition in [the context of] supply chains.”
“[China’s] independent and peaceful diplomacy is what our country has always made clear to the world: we ‘do not seek hegemony’, nor are we interested in constructing ‘rival camps’ in international relations, let alone in forming small cliques as some countries have done. By promoting the establishment of a new type of major power relationship, China's diplomacy hopes to avoid the ‘Thucydides trap’ … to change the ‘zero-sum game’ that is often difficult to avoid in world politics [today], and [also] to bring major power relations back onto a [more] stable and constructive track.”
“As the largest developing country, China needs not only to strengthen cooperation and solidarity with other developing countries, but also to represent their interests in a reasonable and far-reaching manner”
“Although brief and concise, the part of the [Party Congress’s] report that addresses diplomacy once again conveys clearly and powerfully to the international community the "Chinese voice" of great power diplomacy with Chinese characteristics!”
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