Happy New Year, I hope all of you had a wonderful holiday. It is always hard to restart the newsletter after a break, I know I have missed some things from the last two weeks but will try to fill them in over the next few days if it looks like they still matter.
Adding some context to the EU-China CAI news for the Americans:
1. Americans really underestimate the extent to which Europeans feel they need to catch up with the US on investment. Concessions resulting from the Phase 1 trade deal and elsewhere mean that US companies have been getting the kind of access that Europe also wants for its companies. Moreover, the way the Entity List bans work in practice mean that American companies get licences while European companies are not exempted from bans. Trump's sanctions appear to some to help reserve the lucrative Chinese market for US companies.
2. Outgoing Trump people and incoming Biden officials upset that Europe did not ask for permission first need to watch their tone a little bit. DC did not ask for permission to conclude its deals with China. I did not see the same moral outrage about concluding a deal with this regime when America did it. I do not say coordination between Brussels and Washington is not smart, nor do I dismiss the political arguments against this deal. But such arguments are best made keeping European sensitivities in mind as well as American.
3. The deal appears to be pushed mainly by Merkel and Germany in general. Merkel will leave office this year. Her dominance and the presence of France's Macron during the summit have raised some eyebrows in certain European capitals.
4. However, it falls within the EU's own competences. That means its ratification after political approval of the final text (which is still a while off) will have to be done by the European Parliament and the Council of the EU (meeting place of relevant ministers in a kind of senatorial role). There is strong resistance in the EP to this deal. Even if it ultimately votes in favour, the public process is going to be hurtful to China's feelings.
5. Europe needs to be more mindful that China has a history of ignoring its past promises. Moreover, even if it follows through and e.g. ratifies the mentioned ILO conventions, it still depends on interpretation. Beijing denies there is forced labour in Xinjiang, so it would just say the conventions do not apply. After all, the PRC has ratified UNCLOS too, but simply denies it is in violation.
6. However, committing to this agreement now gives Europe a lot of credit in China. This can be helpful in future endeavours. Moreover, once Beijing has committed itself to these promises, the text becomes a stick to beat it with once it breaks them. Germany likes to do things by the book and base itself on what others have committed themselves to. The CAI might also serve to provide justification for stronger countermeasures and defensive regulations in the future in response to breaches.
7. Not everything is about the US. It is counterproductive to see this preliminary deal solely in terms of American/Biden wins/losses.
A question re Ambassador Liu Xiaoming's retirement: was this planned/done for standard age-related reasons, or because of his twitter incident, abysmal interview performances and litany of similar gaffes in 2020? Assuming the former, but you never know...
Sounding confident going into 2021; Politics in command; BRI not dead; 2021 foreign policy priorities; Tesla China
Adding some context to the EU-China CAI news for the Americans:
1. Americans really underestimate the extent to which Europeans feel they need to catch up with the US on investment. Concessions resulting from the Phase 1 trade deal and elsewhere mean that US companies have been getting the kind of access that Europe also wants for its companies. Moreover, the way the Entity List bans work in practice mean that American companies get licences while European companies are not exempted from bans. Trump's sanctions appear to some to help reserve the lucrative Chinese market for US companies.
2. Outgoing Trump people and incoming Biden officials upset that Europe did not ask for permission first need to watch their tone a little bit. DC did not ask for permission to conclude its deals with China. I did not see the same moral outrage about concluding a deal with this regime when America did it. I do not say coordination between Brussels and Washington is not smart, nor do I dismiss the political arguments against this deal. But such arguments are best made keeping European sensitivities in mind as well as American.
3. The deal appears to be pushed mainly by Merkel and Germany in general. Merkel will leave office this year. Her dominance and the presence of France's Macron during the summit have raised some eyebrows in certain European capitals.
4. However, it falls within the EU's own competences. That means its ratification after political approval of the final text (which is still a while off) will have to be done by the European Parliament and the Council of the EU (meeting place of relevant ministers in a kind of senatorial role). There is strong resistance in the EP to this deal. Even if it ultimately votes in favour, the public process is going to be hurtful to China's feelings.
5. Europe needs to be more mindful that China has a history of ignoring its past promises. Moreover, even if it follows through and e.g. ratifies the mentioned ILO conventions, it still depends on interpretation. Beijing denies there is forced labour in Xinjiang, so it would just say the conventions do not apply. After all, the PRC has ratified UNCLOS too, but simply denies it is in violation.
6. However, committing to this agreement now gives Europe a lot of credit in China. This can be helpful in future endeavours. Moreover, once Beijing has committed itself to these promises, the text becomes a stick to beat it with once it breaks them. Germany likes to do things by the book and base itself on what others have committed themselves to. The CAI might also serve to provide justification for stronger countermeasures and defensive regulations in the future in response to breaches.
7. Not everything is about the US. It is counterproductive to see this preliminary deal solely in terms of American/Biden wins/losses.
A question re Ambassador Liu Xiaoming's retirement: was this planned/done for standard age-related reasons, or because of his twitter incident, abysmal interview performances and litany of similar gaffes in 2020? Assuming the former, but you never know...
Wow well there's a lot there. In terms of Wang's speech and what it means for business investments into China, he stressed the BRI and the Dual Circulation Strategy as key parts of China's 2021 Foreign Policy. We covered that in more detail viz-a-viz the China investors angle here: https://www.silkroadbriefing.com/news/2020/12/31/china-to-continue-multilateral-trade-development-policy-along-the-belt-and-road-initiative-in-2021-more-eu-nations-to-sign-bri-mou/. Concerning the Belt & Road slowdown, well it goes without saying really, China has spent US$4 trillion over 7 years and now projects are coming to completion. So what is China's ODI policy now? See here: https://www.china-briefing.com/news/a-new-china-for-2021-foreign-investor-friendly-access-overseas-direct-investment-in-hi-tech-projects-and-ma-and-more-belt-road-initiative-opportunities/ In fact, China invested more in Latin American M&A last year than in the US and EU combined: https://www.silkroadbriefing.com/news/2020/12/30/chinese-companies-hunting-in-latin-america-for-belt-and-road-ma/. Our view from the ground up is that there isn't so much of a slowdown, more a change in direction. The BRI, Dual Circulation Strategy, changes last year to the Foreign Investment Law and the relaxing of the Negative List all make China more open than ever before, and especially for companies involved in selling to China. It is moved from a manufacturing to a consumer base economy, and it is key to understand China now in this context.