Jake Sullivan meets Xi; Philippines resupplies ship at Sabina Shoal; ASML may stop servicing some PRC machines; HK sedition convictions
Summary of today’s Essential Eight:
1. Central Committee for Comprehensive Deepening of Reform meets - The Central Commission for Deepening Overall Reform held its first meeting since the July Third Plenum. The "meeting reviewed and adopted a plan for central Party and state departments to implement major reform measures set in a key resolution adopted last month at the third plenum of the 20th CPC Central Committee" as well as a guideline on upgrading pilot free trade zones. So we should start seeing more detailed reform implementation plans for the "more than 300 reform measures spanning sectors such as the economy, culture and ecology" set forth in the Third Plenum Resolution. Xi’s call to “emancipate our minds” of course means to emancipate them within the parameters of Xi Jinping Thought on XYZ.
2. US National Security Advisor Sullivan in Beijing - US National Security Advisor met with Xi, Wang Yi and CMC Vice Chair Zhang Youxia. Obama’s National Security Advisor Susan Rice got a similar slate of meetings in her visit eight years ago, so the protocol is not surprising. From the various readouts it does not sound like much immediate progress was made on any substantive issues, but they will keep talking, including a a call between Biden and Xi in the next few weeks, a possible meeting at APEC in Peru the week after the US election, if President Biden goes, and a theater commander telephone call. Incorrect US perception of China is still one of the main complaints, and Xi remains unwilling to admit publicly that the US in China are rivals, telling Sullivan that “the No. 1 issue is to develop a right strategic perception, and they need to first and foremost find a good answer to the overarching question: Are China and the United States rivals or partners?”. The two sides do not appear to have agreed on a deal for the release of exit-banned Americans; the US readout of the Sullivan Wang Yi meeting said “Mr. Sullivan reiterated that it remains a top priority to resolve the cases of American citizens who are wrongfully detained or subject to exit bans in China” . The PRC-Philippines tensions were also on the agenda, and while Sullivan was in Beijing the Philippines resupplied their ship at Sabina(Escoda) Shoal/Xianbin Jiao by helicopter. (See item 4). There was no mention of an extension to the U.S.-China Science and Technology Agreement (STA), whose most recent six month extension lapsed on August 27.
3. ASML to stop servicing equipment already sold to China? - Bloomberg reports that ASML may have “been persuaded” to stop servicing some existing chipmaking equipment it has sold into the PRC. That could be a very big deal if true, depending on what licenses the company would not renew. From the Bloomberg report: “the government of Prime Minister Dick Schoof will likely not renew certain ASML licenses to service and provide spare parts in China when they expire at the end of this year.”
4. Philippine helicopter resupplies vessel at blockaded Sabina Shoal - On Monday when commenting on the standoff at Sabina Shoal I wrote “The Philippines may have planned for a long blockade and so stocked up, but at some point they will run out of food, fuel and water. A Xinhua commentary says "China will never be deceived by the Philippines again", as they feel they were at Second Thomas Shoal. There does not appear to be any appetite for compromise on the PRC side, so either the Philippines Coast Guard ship remains with no crew rotation until they are almost out of food, fuel and water, or the Philippines has to ask the US for help in breaking what is effectively a PRC blockade around Sabina Shoal.” I was wrong, as the BRP Teresa Magbanua has a helipad and today the Philippines resupplied it by helicopter, and the PRC side did not interfere. Perhaps there was restraint because the US National Security Advisor was in Beijing? Otherwise the PRC attempts at forcing the ship to depart the shoal would be undermined by regular airborne missions.
5. Hong Kong court finds 2 Stand News editors guilty of sedition - They were charged for articles and opeds the outlet published during the 2019 protests.
6. Local governments selling assets - A district government in Chongqing issued a notice about forming a “Sell Everything to Save the Day” task force to raise cash by selling state-owned assets. The notice went viral on the PRC Internet. Many local governments are under pressure to find ways to monetize their assets, though I still do not understand who are the buyers, how they finance the purchases, and how they make the assets more "productive" to generate enough of a return to justify the purchase. It seems possible that there could be moving of assets from one government pocket to another using loans from state-owned banks?
7. China's Energy Transition white paper - The State Council Information Office released a white paper to “document the country's successful actions and historic achievements in energy transition over the past ten years”.
8. Economist’s David Rennie bids farewell to Beijing - David Rennie is leaving Beijing after 6.5 years to return to London. This is his last dispatch from China. His replacement is still waiting for their visa. He is leaving I believe with a much darker view of China and the future than when he took up this post in 2018.