Table.Briefing: China

SCO Influence + Uncertainty in Hong Kong

  • SCO gives Beijing a powerful position in Central Asia
  • Is Hong Kong losing significance?
  • Biden ready to dispatch soldiers to Taiwan in case of conflict
  • Hamburgs mayor fears for relevance of Hamburg port
  • Criticism of zero-Covid after bus accident in Guizhou
  • Epidemiologist advises against touching foreigners
  • Opinion: ‘At what point does cooperation lead to complicity?’
Dear reader,

What better way to symbolize the debate about the growing estrangement between the People’s Republic and foreign countries than by China’s chief epidemiologist’s recommendation to avoid physical contact with foreigners? It seems that decades of fighting for China’s friendship have been for naught when we are so categorically classified as a health risk.

Friendship is already a fragile construct when it is primarily motivated by economic interests. It is all the more important that these interests come to light before swearing undying loyalty to each other. The author of today’s Opinion, Professor Ralph Weber of the University of Basel, has studied the influence of the Chinese party-state on our society in great detail and found that we often completely overlook the depth of the interconnection between economic exchange and political motivation by our Chinese partners.

In Hong Kong, too, ideology has come to play a much bigger role in the economic context since John Lee became the city’s new chief executive. Where once the focus had been on growth and opportunity, nowadays, the message of the importance of political stability is being spread in the spirit of the CP, writes Ning Wang after speaking to people on the ground.

Incidentally, political stability is also the mantra of Turkish leader Recep Erdoğan, who wants to be re-elected president next year. He urgently needs to create economic prospects and probably sees good chances for this in closer ties with China, as a potential member of the Shanghai Cooperation Organization. This is rather unpleasant news for NATO, which has to watch Beijing pave the way to greater influence over a NATO member state.

At least the Western alliance can hope that relationships formed primarily out of economic interests hardly have what it takes to become intimate friendships.

Your
Marcel Grzanna
Image of Marcel  Grzanna

Feature

Uncertainty in Hong Kong benefits China-plus-1 strategy

Hongkong begeht seinen Jahrestag - hier wird deutlich, wie viel Autonomie aufgegeben wurde und wie nah die Metropole an Peking gerückt ist.
Hong Kong’s autonomy can now only be interpreted in small things – the uncertainty is paralyzing.

Hong Kong’s new Chief Executive, John Lee, took office three months ago, but things have been surprisingly quiet around him. That may be deliberate. Whereas his predecessor Carrie Lam had clear announcements, actions and thus publicly discussed controversies, silence and unpredictability reign under Lee. This raises questions: Where is Hong Kong headed? Where are the red lines? The lack of clarity covers the metropolis like a heavy blanket, and it also causes problems for the city’s expats.

“People are becoming more and more cautious about making political statements,” says a German woman who has lived in Hong Kong for more than 15 years and would only speak to China.Table anonymously. “I have also become very cautious,” she says. On social media, she refrains from posts that might be interpreted negatively. For an upcoming art exhibition she helped organize, she chose green T-shirts for participants rather than black ones, merely to avoid an association with the 2019 protest movements. Anticipatory obedience, like one that has been known in Mainland China for a long time, is spreading.

Growing concern is now also gripping multinational companies, associations and other institutions. They are increasingly asking themselves whether Hong Kong is still a sensible place to do business. These doubts were also recently highlighted at the Belt and Road Summit in late August. One participant, who also wishes to remain anonymous, estimated in an interview with China.Table that the number of Western expats in the room could be “counted on two hands” – among more than 1,300 participants.

The estrangement could be felt in other ways as well. The event, which is supposed to promote the global integration of the New Silk Road, was exclusively held in Standard Chinese – and not, as announced previously, in English as well. Cantonese, which had been common in previous years, was also dropped as the official language of the event.

Other countries attract companies with benefits

As a result, the summit of the Hong Kong Trade Development Council, a semi-governmental non-profit organization that promotes international economic and trade relations, resembled more of a staged political campaign, she summed up the summit. For her, it seemed to be more like the government’s attempt at preaching the motto “From chaos to governance and from governance to prosperity” like a mantra.

Such events certainly do not boost the faith of foreign companies in the business location of Hong Kong, but are more likely to reinforce their growing skepticism. As early as spring, GTAI, Germany’s foreign trade promotion agency, noted that many companies were expanding their branches outside Hong Kong. Singapore was said to be a popular alternative.

The exodus of foreign workers from international companies also continues: One moving company reports that it has been contracted for 250 moves out of the city in the past year – and contrast to only 17 new arrivals in the same period. Many foreigners are leaving the special administrative region since it became clear that international schools will soon be teaching civics classes under Beijing’s interpretation.

For companies that manufacture goods in the city – and not only maintain an office in Hong Kong – countries like Vietnam have become more and more interesting. Thus, many foreign companies have been pursuing a so-called China-plus-1 strategy for some time now: They look for other locations in the region besides China. Some Asian countries, like Thailand, Vietnam or Malaysia, are attracting foreign investment with commercial and tax benefits, The Diplomat reports.

Insurers experience shortage of skilled workers

For Hong Kong native Louisa Lim, whose book: Hong Kong – “Indelible City: Dispossession and Defiance in Hong Kong” was recently published, the current ambiguities are part of a tactic by the Chinese government to break the last remaining resistance in Hong Kong civil society: Uncertainty paralyzes, worries dominate everyday life. “At the moment, it is a less predictable environment than in mainland China, particularly with regard to where the political red lines are,” Lim told trade portal The Wire China about the situation in Hong Kong.

It also remains unclear how Hong Kong is supposed to attract multinational companies with its current course instead of losing them. The “brain drain”, i.e. the loss of bright minds and talent, has long been ongoing and is resulting in a shortage of skilled workers. Insurance is one example: The Hong Kong Association of Insurers, for example, stated that about one in three insurance companies is forced to downsize its local workforce.

However, the city is counting on its role as a financial hub in the “Greater Bay Area” of the Pearl River Delta, according to which Hong Kong will be more closely connected with important cities in the coastal province of Guangdong. According to the plans, this economic region will gain international significance through integration by 2035. Its contribution to China’s gross domestic product is already as large as the entire economic output of South Korea.

But it is uncertain whether Hong Kong will then become just one of many cities to join the ranks instead of being at the center itself. Beijing has recently been focusing more on Shenzhen and Shanghai as financial trading centers – and, for example, launched the Star-Market technology exchange in Shanghai two years ago.

China’s outbound investment mainly from Hong Kong

China’s government data shows that foreign investment in the economy has risen by nearly a fifth this year. According to state media, the government sees this as evidence that global companies are resisting calls from US and European politicians to reduce their dependence on the country.

However, a closer look at the investments reveals a different picture. Much of this investment in mainland China actually comes from Hong Kong. According to experts, this is due to the fact that mainland companies based there channel funds through the city in a circular system known as “round-tripping”. Researchers at the Chinese Academy of Social Sciences and Nankai University estimate that nearly 37 percent of inbound foreign direct investment to China moves back and forth in this system, financial services provider Bloomberg reported. Will this be the former British crown colony’s main role in the future?

Chinese companies based in offshore financial centers are also primarily responsible for the increase in foreign direct investment, “making the expression ‘foreign’ investment somewhat of a misnomer,” according to Raymond Yeung, chief economist at Greater China, Australia & New Zealand Banking Group.

  • Brain drain
  • Civil Society
  • GTAI
  • Industry
  • Personal
  • Society
  • Trade

How China expands its influence through the SCO

Xi Jinping sets the course at the SCO summit in Samarkand.

Those interested in the rise and fall of great powers could observe something astonishing at the Shanghai Cooperation Organization (SCO) summit in Uzbekistan over the weekend – not so much in the official speeches or the agreements signed, but rather in the protocol: When China’s President Xi Jinping arrived at Samarkand airport, President Shavkat Mirsiyoyev was waiting at the runway, waving warmly, accompanied by countless dance groups. Even a pagoda specially erected for the occasion on the runway was passed on the way. The scene was completely different for Vladimir Putin: The Russian president had to be content with the Uzbek prime minister – without folklore or music and even without a handshake.

It was already clear on the runway that China had begun to call the shots in Central Asia. And as a vehicle for this, it uses the Shanghai Cooperation Organization. “The SCO is increasingly gaining in size and weight. It is more and more serving China and Russia as an alternative to the existing US-dominated institutions of international politics,” Eva Seiwert, research associate at the Friedrich Alexander University Erlangen-Nuremberg and associate research fellow at the OSCE Academy in Bishkek, told China.Table.

After initial restraint, Beijing is now keen to shape the SCO into an important player on the international political stage – and the next steps were taken to this end at the summit in Samarkand: It was decided that Iran would soon be accepted as a new member of the organization (China.Table reported). In addition, Turkish President Recep Tayyip Erdogan announced that his country was also seeking SCO membership.

SCO threatens to become more anti-West

The imminent accession of Iran in April next year means an enormous expansion of the SCO westward, says Seiwert. The SCO expert notes that further steps have already been taken in this regard at the Samarkand summit, in which Saudi Arabia was admitted to the SCO as a new dialogue partner. “This step is clearly at the behest of China,” Seiwert explains. With Iran, the SCO threatens to become a lot more clearly an anti-Western organization, she says.

As early as 2017, Chinese researcher Pan Guang predicted in an essay that China would try to expand the SCO’s influence, including to the Middle East. As potential methods, the director of the SCO Research Center at the Shanghai Academy of Social Sciences mentioned Chinese entrepreneurs and construction workers, as well as Chinese soldiers and the naval base in Djibouti.

What is certain is that this is a matter of geopolitics. The SCO – once a small, informal assembly called the Shanghai Five, consisting of China, Russia, Kyrgyzstan, Tajikistan and Kazakhstan – is on its way to becoming a geostrategic factor. Uzbekistan, India and Pakistan have since joined.

Today, the organization’s members represent four nuclear powers and 44 percent of the global population. And there are more to come: Iran will probably follow in April 2023. Also in the race are Belarus, Saudi Arabia, Qatar, Egypt, the Maldives and Bahrain. And of course Turkey.

SCO accession of Turkey would have enormous consequences

In any case, at this weekend’s SCO summit, the Turkish president appeared eager to join the illustrious circle. “Our relations with these countries will be moved to a much different position with this step,” Erdogan said in Samarkand. It would be a huge step because Turkey would be the first NATO member to join the China-led group. The geopolitical consequences would be enormous.

Germany’s government reacted correspondingly nervously. “NATO and the European Union must ask themselves how long they will allow Erdoğan to play them,” said Juergen Trittin, foreign policy spokesman for the Green Party in the Bundestag, in an interview with the German newspaper Welt. Nils Schmid, foreign policy spokesman for the SPD parliamentary group, points above all to the geopolitical consequences: “In foreign policy terms, this would be another symbolic step away from the West and its values – a serious political mistake for Turkey’s future.”

Meanwhile, Cagri Erhan, a professor of international relations and member of the Turkish president’s security advisory council, tried to appease concerns on Twitter: “What Ankara is doing is not seeking alternatives to the West, but building balanced relations with the whole world.”

Turkey’s accession would also offer great benefits for China: Turkey’s geostrategic position is a key aspect in the realization of important elements of Xi Jinping’s large-scale geo-economic project, the Belt-and-Road initiative. And Seiwert points out another important aspect: If Turkey were indeed to join the SCO, it would lose its right to criticize the Chinese treatment of the Uyghurs in Xinjiang. Because: Within the SCO, the respective national definitions of terrorism must be adopted by all countries. This means: “Just like protests by the Uyghurs are already suppressed in Kazakhstan because China wants it that way, Turkey, as an SCO member, would also have to adopt China’s position and label the Uyghurs as a threat.”

China stands to benefit

But all that is still a long way off, says Seiwert. Turkey’s SCO membership will take another five years. At least. And Turkey’s aspiration to join the SCO is also much older than current reports suggest: Erdogan had already expressed this desire in 2013. That is why the Turkish president’s appearance at the summit in Samarkand should be seen primarily as a message to the West: “He wants to show that Turkey now has serious alternatives to the West in the form of the SCO,” says Seiwert.

But whether Turkey will join the SCO in the coming months or not for another five years: The country’s potential accession would shift the balance of power dramatically. After all, despite all the quarrels with Erdogan, Turkey continues to be of high strategic value to the West – especially when it comes to dealing with regional security challenges: It is paramount for EU member states that the refugee agreement of March 2016 with Turkey remains in place. In addition, Turkey houses several key NATO military facilities that are of vital strategic importance to the alliance’s capabilities.

With or without Turkey, the SCO continued to gain importance over the weekend in Samarkand, and Xi Jinping further expanded China’s role as a key player within the organization. Moreover, China’s leadership repeatedly manages to identify opportunities and exploit them to its benefit: Turkey’s current strategic disorientation would be one such case.

  • Geopolitics
  • Russia
  • Shanghai Cooperation Organisation
  • Shanghai Cooperation Organization
  • Turkey
  • Xi Jinping

News

Biden would deploy US soldiers to Taiwan

US President Joe Biden has pledged US military support for Taiwan. In an interview with the CBS television station, Biden announced the deployment of American troops to the island nation in the event of an “unprecedented attack” by China. This is the first time Biden has implied that the United States is prepared to intervene directly in possible hostilities between China and Taiwan.

By confirming further arms deals and increased presence in the Indo-Pacific as well as in the Taiwan Strait, Washington already signaled in recent months an increasing commitment to defend its ally (China.Table reported).

China’s Foreign Ministry criticized Biden’s announcement and accused the US president of encouraging secessionist forces on the island. For Beijing, a possible formal declaration of independence by Taiwan is one of its red lines. For years, the People’s Republic has threatened to annex Taiwan militarily if this red line was crossed.

In Taiwan’s capital, Taipei, however, the Foreign Ministry was pleased that Biden reaffirmed “the US government’s rock-solid commitment to Taiwan’s security.” The country announced plans to further expand its self-defense capabilities and is interested in deepening its partnership with the US on defense issues. grz

  • Military
  • Security

Hamburg’s mayor warns against Cosco deal intervention

On Monday, Hamburg’s First Mayor Peter Tschentscher urgently warned against rejecting the investment of the Chinese shipping company Cosco in the Port of Hamburg. Should Economy Minister Robert Habeck reject Cosco’s participation in the “Tollerort” container terminal, it would have serious competitive disadvantages for Hamburg. “A rejection of Cosco’s participation by the German government cannot be justified on the grounds of national security and independence,” Tschentscher told Reuters. It would be a heavy burden for the business site and “a one-sided, competition-distorting disadvantage for Hamburg compared to Rotterdam and Antwerp, where Cosco already owns terminal shares.”

Tollerort is one of three container terminals in the Port of Hamburg – and the Chinese shipping company Cosco wants to acquire a 35 percent minority stake. While both Hamburg’s politicians and the business community would welcome an entry, the Ministry of Economics seems to harbor reservations (China.Table reported). An investment review procedure based on the Foreign Trade and Payments Act is currently in progress. Some believe that critical infrastructure such as a port terminal should not fall into Chinese hands, not even partly.

Tschentscher, on the other hand, believes that in order to survive in international competition, terminal investments by Chinese shipping companies should also be possible in Hamburg. Hamburg would not be the first port with Chinese stakes. In Europe alone, Cosco has invested in 14 ports together with its partner company China Merchants, including majority stakes in Valencia and Bilbao, as well as shares in the North Range ports of Rotterdam, Antwerp and Zeebrugge. rad

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  • Germany
  • Logistics
  • Trade

CDC recommends avoiding foreigners

The chief epidemiologist of the Chinese Center for Disease Control and Prevention (CDC), Wu Zunyou, recommends avoiding physical contact with foreigners due to the spread of monkeypox. Any contact should also be avoided for three weeks with Chinese returning to the People’s Republic after an international journey, as well as with strangers in general, Wu said. With these behavioral tips, the physician wants to prevent the spread of infection after the first case of the disease was diagnosed in China last Friday in the western metropolis of Chongqing.

Health authorities suspect that the disease was brought in from Germany. According to a statement by the CDC, clear matches were found with a virus strain that had appeared in Germany in late June. The patient allegedly stayed in Germany between September 2 and 8 and had sexual intercourse during that time, which authorities believe to be the cause of transmission. grz

  • Germany
  • Health
  • Monkeypox

Bus accident triggers criticism of zero-Covid

The deaths of 27 people in a crash have sparked criticism of China’s zero-Covid policy. The victims were passengers on a bus that crashed Sunday morning on its way to a quarantine facility in Guizhou province. Another 20 people were injured. People subsequently complained on social media about the internment of those who tested positive and their contacts in isolation facilities – until all critical comments were deleted by the censors.

Users questioned the sense of the quarantine centers, when people could also isolate themselves at home for weeks. Infected individuals and those with a perceived increased risk of infection are often detained in quarantine facilities for weeks by authorities in many Chinese cities, even after multiple negative tests (China.Table reported).

The predominantly agricultural province of Guizhou reported a significant increase in infections over the weekend. On Saturday, 712 infections had been diagnosed. Two out of three Covid cases on Saturday thus came from the southern Chinese province. The bus with 47 passengers crashed on a highway at 02:40 on Sunday night. Normally, occupied passenger buses are not allowed to travel on the highways between 02:00 and 05:00 in the morning. grz

  • Health

Opinion

At what point does cooperation lead to complicity?

By Ralph Weber
Ralph Weber, Professor of European Global Studies

Just a few years ago, cooperation with partners from the People’s Republic of China was high on the agendas of numerous European players. Those who refused to participate simply failed to read the signs.

But cooperation has become more complicated. The image of the Chinese government has suffered considerably in recent years because of its human rights crimes in Xinjiang or threats against Taiwan – to name just two aspects. Today, close cooperation with a systematic rival that has openly declared war on our democracies and values must be very well justified to avoid being caught in the crossfire of criticism.

However, because some in the West have a lot to lose, some paint the devil of full decoupling on the wall. It is supposed to show the dangers we face if we distance ourselves too much from China. Often the devil does his job.

Unconditional cooperation and complete decoupling represent two unattractive ends of a spectrum that needs to be considered individually for each business sector. Anyone conducting business in Xinjiang, where people are imprisoned against their will, re-educated, and forced to work in some cases, faces greater (and practically impossible) due diligence than a company producing screwdrivers in Shanghai.

Suggests that cooperation is inherently the right path

Cooperation partners in the People’s Republic are subject to the dictates and whims of the party-state. Some are even directly docked to the party-state. The pressure that the party-state is able to exert on private Chinese entrepreneurs is also enormous. In such a system, every cooperation is ultimately always a co-optation. The ensuing question is: How to handle this? And if you are aware of it, how transparent do you act?

Germany’s former Minister of Defense, Rudolf Scharping, complains that “the nuances” are lost if direct and personal exchanges are not cultivated. Sober analysis is needed instead of decoupling. He pleads for cooperation. He cites trade, investment, research and development, and necessary negotiations. Without China, for example, there would be no globally viable response to climate change.

To put it bluntly, it reads like this: Since complete decoupling (which apparently excludes even negotiations) is bad and efforts to address climate change are good, the suggestion is that cooperation per se is the right way to go. The problem is that the cooperation partner cannot be freely chosen in China, but automatically ends up in the hands of those who are responsible for the aforementioned human rights crimes in Xinjiang or the military threats against Taiwan.

Even Scharping cannot elude the powers that be. This became apparent at the 9th German-Chinese Business Conference in Frankfurt in early September, which was jointly organized by his consulting firm and the China Economic Cooperation Center (CECC, 中国经济联络中心) and supported by the China Council for International Investment Promotion (CCIIP, 中国国际投资促进会).

The CECC reports directly to the International Liaison Department, which is part of the Central Committee of the Communist Party of China. The International Liaison Department is responsible for the CP’s relations with other parties outside the country, historically primarily with other communist parties, but since the reform and opening-up policy also with political parties of all kinds.

Influencing is barely denied

Since the early 2000s, and especially under President Xi Jinping, the International Liaison Department (as well as the Propaganda Department and especially the Unified Front Work Department) has gained significance. The fact that this involves influencing, co-opting, and asserting foreign policy interests of the Chinese party-state is hardly denied.

Recent research on the International Liaison Department also mentions Germany’s special position in Europe in these efforts. The CECC’s homepage also explicitly states the goal of promoting the “external work” (对外工作) of the CCP and implementing “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.”

The fact that the International Liaison Department is behind the CECC can also be seen in the list of speakers at the Frankfurt conference. Shen Beili 沈蓓莉 and Liu Jingqin 刘敬钦, one current and one former top official of the International Liaison Department, attended the event. Jiang Feng 姜锋, the Party Secretary of Shanghai International Studies University, also delivered a speech in Frankfurt. The latter, in a conversation with Scharping published by the People’s Daily in January 2022, described the PRC political system “as a multi-party system” in which there are “many democratic parties” – meaning the “parties” that are under the leadership and control of the CCP and gathered in the united front.

Cooperation with the International Liaison Department is by no means new. For instance, last year Scharping attended the Summit between the Chairman of the Chinese Communist Party and Political Parties Worldwide, which is hosted by the International Liaison Department. There, he praised the CCP several times in his speech. But the fact that cooperation with actors from the People’s Republic of China always leads to co-optation is ultimately owed to a systemic necessity inherent in a one-party dictatorship, which is China’s political system as stated in Article 1 of the state constitution and despite its cadres’ claims to the contrary. Under this system, all relations with the world are managed outside the Party and, as far as possible, subordinated to the Party agenda.

At what point does cooperation lead to complicity?

Those who choose cooperation, for which there may be good reasons, must find a way to deal with co-optation. Do you censor yourself to some extent because you don’t want to burden your counterpart too much, out of politeness, clever tactics or because this would help you to achieve your own interests? Or do you even explicitly echo the propaganda positions of the Chinese Communist Party, which are normalized in the process, and thus even accept the successful exercise of discourse power? At what point does cooperation lead to complicity?

All these questions may and must be answered individually and differently in each case. But one thing is clear: If one cooperates directly with Chinese party-state institutions, one must transparently disclose this fact. This is the only way to leave it up to others to decide how far they want to be appropriate.

Ralph Weber is a Professor of European Global Studies at the University of Basel in Switzerland. His research fields include Chinese political philosophy, modern Confucianism, and Chinese politics. He focuses on European-Chinese relations and published a widely acclaimed study on the influence of the Chinese party-state in Switzerland in December 2020.

  • Chinese Communist Party
  • Geopolitik

Executive Moves

The Vice President of the European Chamber of Commerce in Beijing, Guido Giacconi, has passed away. As announced by Chamber President Joerg Wuttke, Giacconi passed away over the weekend in his home country. Giacconi had been active for the Chamber of Commerce since May last year.

Is something changing in your organization? Why not let us know at heads@table.media!

Dessert

Party on: After a three-month Covid break, Beijing authorities allowed club nights at selected locations last weekend. At the iWork Science and Innovation Park, hundreds of young people came together to party – cigarette breaks outside the entrance included.

China.Table editorial office

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    • SCO gives Beijing a powerful position in Central Asia
    • Is Hong Kong losing significance?
    • Biden ready to dispatch soldiers to Taiwan in case of conflict
    • Hamburgs mayor fears for relevance of Hamburg port
    • Criticism of zero-Covid after bus accident in Guizhou
    • Epidemiologist advises against touching foreigners
    • Opinion: ‘At what point does cooperation lead to complicity?’
    Dear reader,

    What better way to symbolize the debate about the growing estrangement between the People’s Republic and foreign countries than by China’s chief epidemiologist’s recommendation to avoid physical contact with foreigners? It seems that decades of fighting for China’s friendship have been for naught when we are so categorically classified as a health risk.

    Friendship is already a fragile construct when it is primarily motivated by economic interests. It is all the more important that these interests come to light before swearing undying loyalty to each other. The author of today’s Opinion, Professor Ralph Weber of the University of Basel, has studied the influence of the Chinese party-state on our society in great detail and found that we often completely overlook the depth of the interconnection between economic exchange and political motivation by our Chinese partners.

    In Hong Kong, too, ideology has come to play a much bigger role in the economic context since John Lee became the city’s new chief executive. Where once the focus had been on growth and opportunity, nowadays, the message of the importance of political stability is being spread in the spirit of the CP, writes Ning Wang after speaking to people on the ground.

    Incidentally, political stability is also the mantra of Turkish leader Recep Erdoğan, who wants to be re-elected president next year. He urgently needs to create economic prospects and probably sees good chances for this in closer ties with China, as a potential member of the Shanghai Cooperation Organization. This is rather unpleasant news for NATO, which has to watch Beijing pave the way to greater influence over a NATO member state.

    At least the Western alliance can hope that relationships formed primarily out of economic interests hardly have what it takes to become intimate friendships.

    Your
    Marcel Grzanna
    Image of Marcel  Grzanna

    Feature

    Uncertainty in Hong Kong benefits China-plus-1 strategy

    Hongkong begeht seinen Jahrestag - hier wird deutlich, wie viel Autonomie aufgegeben wurde und wie nah die Metropole an Peking gerückt ist.
    Hong Kong’s autonomy can now only be interpreted in small things – the uncertainty is paralyzing.

    Hong Kong’s new Chief Executive, John Lee, took office three months ago, but things have been surprisingly quiet around him. That may be deliberate. Whereas his predecessor Carrie Lam had clear announcements, actions and thus publicly discussed controversies, silence and unpredictability reign under Lee. This raises questions: Where is Hong Kong headed? Where are the red lines? The lack of clarity covers the metropolis like a heavy blanket, and it also causes problems for the city’s expats.

    “People are becoming more and more cautious about making political statements,” says a German woman who has lived in Hong Kong for more than 15 years and would only speak to China.Table anonymously. “I have also become very cautious,” she says. On social media, she refrains from posts that might be interpreted negatively. For an upcoming art exhibition she helped organize, she chose green T-shirts for participants rather than black ones, merely to avoid an association with the 2019 protest movements. Anticipatory obedience, like one that has been known in Mainland China for a long time, is spreading.

    Growing concern is now also gripping multinational companies, associations and other institutions. They are increasingly asking themselves whether Hong Kong is still a sensible place to do business. These doubts were also recently highlighted at the Belt and Road Summit in late August. One participant, who also wishes to remain anonymous, estimated in an interview with China.Table that the number of Western expats in the room could be “counted on two hands” – among more than 1,300 participants.

    The estrangement could be felt in other ways as well. The event, which is supposed to promote the global integration of the New Silk Road, was exclusively held in Standard Chinese – and not, as announced previously, in English as well. Cantonese, which had been common in previous years, was also dropped as the official language of the event.

    Other countries attract companies with benefits

    As a result, the summit of the Hong Kong Trade Development Council, a semi-governmental non-profit organization that promotes international economic and trade relations, resembled more of a staged political campaign, she summed up the summit. For her, it seemed to be more like the government’s attempt at preaching the motto “From chaos to governance and from governance to prosperity” like a mantra.

    Such events certainly do not boost the faith of foreign companies in the business location of Hong Kong, but are more likely to reinforce their growing skepticism. As early as spring, GTAI, Germany’s foreign trade promotion agency, noted that many companies were expanding their branches outside Hong Kong. Singapore was said to be a popular alternative.

    The exodus of foreign workers from international companies also continues: One moving company reports that it has been contracted for 250 moves out of the city in the past year – and contrast to only 17 new arrivals in the same period. Many foreigners are leaving the special administrative region since it became clear that international schools will soon be teaching civics classes under Beijing’s interpretation.

    For companies that manufacture goods in the city – and not only maintain an office in Hong Kong – countries like Vietnam have become more and more interesting. Thus, many foreign companies have been pursuing a so-called China-plus-1 strategy for some time now: They look for other locations in the region besides China. Some Asian countries, like Thailand, Vietnam or Malaysia, are attracting foreign investment with commercial and tax benefits, The Diplomat reports.

    Insurers experience shortage of skilled workers

    For Hong Kong native Louisa Lim, whose book: Hong Kong – “Indelible City: Dispossession and Defiance in Hong Kong” was recently published, the current ambiguities are part of a tactic by the Chinese government to break the last remaining resistance in Hong Kong civil society: Uncertainty paralyzes, worries dominate everyday life. “At the moment, it is a less predictable environment than in mainland China, particularly with regard to where the political red lines are,” Lim told trade portal The Wire China about the situation in Hong Kong.

    It also remains unclear how Hong Kong is supposed to attract multinational companies with its current course instead of losing them. The “brain drain”, i.e. the loss of bright minds and talent, has long been ongoing and is resulting in a shortage of skilled workers. Insurance is one example: The Hong Kong Association of Insurers, for example, stated that about one in three insurance companies is forced to downsize its local workforce.

    However, the city is counting on its role as a financial hub in the “Greater Bay Area” of the Pearl River Delta, according to which Hong Kong will be more closely connected with important cities in the coastal province of Guangdong. According to the plans, this economic region will gain international significance through integration by 2035. Its contribution to China’s gross domestic product is already as large as the entire economic output of South Korea.

    But it is uncertain whether Hong Kong will then become just one of many cities to join the ranks instead of being at the center itself. Beijing has recently been focusing more on Shenzhen and Shanghai as financial trading centers – and, for example, launched the Star-Market technology exchange in Shanghai two years ago.

    China’s outbound investment mainly from Hong Kong

    China’s government data shows that foreign investment in the economy has risen by nearly a fifth this year. According to state media, the government sees this as evidence that global companies are resisting calls from US and European politicians to reduce their dependence on the country.

    However, a closer look at the investments reveals a different picture. Much of this investment in mainland China actually comes from Hong Kong. According to experts, this is due to the fact that mainland companies based there channel funds through the city in a circular system known as “round-tripping”. Researchers at the Chinese Academy of Social Sciences and Nankai University estimate that nearly 37 percent of inbound foreign direct investment to China moves back and forth in this system, financial services provider Bloomberg reported. Will this be the former British crown colony’s main role in the future?

    Chinese companies based in offshore financial centers are also primarily responsible for the increase in foreign direct investment, “making the expression ‘foreign’ investment somewhat of a misnomer,” according to Raymond Yeung, chief economist at Greater China, Australia & New Zealand Banking Group.

    • Brain drain
    • Civil Society
    • GTAI
    • Industry
    • Personal
    • Society
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    How China expands its influence through the SCO

    Xi Jinping sets the course at the SCO summit in Samarkand.

    Those interested in the rise and fall of great powers could observe something astonishing at the Shanghai Cooperation Organization (SCO) summit in Uzbekistan over the weekend – not so much in the official speeches or the agreements signed, but rather in the protocol: When China’s President Xi Jinping arrived at Samarkand airport, President Shavkat Mirsiyoyev was waiting at the runway, waving warmly, accompanied by countless dance groups. Even a pagoda specially erected for the occasion on the runway was passed on the way. The scene was completely different for Vladimir Putin: The Russian president had to be content with the Uzbek prime minister – without folklore or music and even without a handshake.

    It was already clear on the runway that China had begun to call the shots in Central Asia. And as a vehicle for this, it uses the Shanghai Cooperation Organization. “The SCO is increasingly gaining in size and weight. It is more and more serving China and Russia as an alternative to the existing US-dominated institutions of international politics,” Eva Seiwert, research associate at the Friedrich Alexander University Erlangen-Nuremberg and associate research fellow at the OSCE Academy in Bishkek, told China.Table.

    After initial restraint, Beijing is now keen to shape the SCO into an important player on the international political stage – and the next steps were taken to this end at the summit in Samarkand: It was decided that Iran would soon be accepted as a new member of the organization (China.Table reported). In addition, Turkish President Recep Tayyip Erdogan announced that his country was also seeking SCO membership.

    SCO threatens to become more anti-West

    The imminent accession of Iran in April next year means an enormous expansion of the SCO westward, says Seiwert. The SCO expert notes that further steps have already been taken in this regard at the Samarkand summit, in which Saudi Arabia was admitted to the SCO as a new dialogue partner. “This step is clearly at the behest of China,” Seiwert explains. With Iran, the SCO threatens to become a lot more clearly an anti-Western organization, she says.

    As early as 2017, Chinese researcher Pan Guang predicted in an essay that China would try to expand the SCO’s influence, including to the Middle East. As potential methods, the director of the SCO Research Center at the Shanghai Academy of Social Sciences mentioned Chinese entrepreneurs and construction workers, as well as Chinese soldiers and the naval base in Djibouti.

    What is certain is that this is a matter of geopolitics. The SCO – once a small, informal assembly called the Shanghai Five, consisting of China, Russia, Kyrgyzstan, Tajikistan and Kazakhstan – is on its way to becoming a geostrategic factor. Uzbekistan, India and Pakistan have since joined.

    Today, the organization’s members represent four nuclear powers and 44 percent of the global population. And there are more to come: Iran will probably follow in April 2023. Also in the race are Belarus, Saudi Arabia, Qatar, Egypt, the Maldives and Bahrain. And of course Turkey.

    SCO accession of Turkey would have enormous consequences

    In any case, at this weekend’s SCO summit, the Turkish president appeared eager to join the illustrious circle. “Our relations with these countries will be moved to a much different position with this step,” Erdogan said in Samarkand. It would be a huge step because Turkey would be the first NATO member to join the China-led group. The geopolitical consequences would be enormous.

    Germany’s government reacted correspondingly nervously. “NATO and the European Union must ask themselves how long they will allow Erdoğan to play them,” said Juergen Trittin, foreign policy spokesman for the Green Party in the Bundestag, in an interview with the German newspaper Welt. Nils Schmid, foreign policy spokesman for the SPD parliamentary group, points above all to the geopolitical consequences: “In foreign policy terms, this would be another symbolic step away from the West and its values – a serious political mistake for Turkey’s future.”

    Meanwhile, Cagri Erhan, a professor of international relations and member of the Turkish president’s security advisory council, tried to appease concerns on Twitter: “What Ankara is doing is not seeking alternatives to the West, but building balanced relations with the whole world.”

    Turkey’s accession would also offer great benefits for China: Turkey’s geostrategic position is a key aspect in the realization of important elements of Xi Jinping’s large-scale geo-economic project, the Belt-and-Road initiative. And Seiwert points out another important aspect: If Turkey were indeed to join the SCO, it would lose its right to criticize the Chinese treatment of the Uyghurs in Xinjiang. Because: Within the SCO, the respective national definitions of terrorism must be adopted by all countries. This means: “Just like protests by the Uyghurs are already suppressed in Kazakhstan because China wants it that way, Turkey, as an SCO member, would also have to adopt China’s position and label the Uyghurs as a threat.”

    China stands to benefit

    But all that is still a long way off, says Seiwert. Turkey’s SCO membership will take another five years. At least. And Turkey’s aspiration to join the SCO is also much older than current reports suggest: Erdogan had already expressed this desire in 2013. That is why the Turkish president’s appearance at the summit in Samarkand should be seen primarily as a message to the West: “He wants to show that Turkey now has serious alternatives to the West in the form of the SCO,” says Seiwert.

    But whether Turkey will join the SCO in the coming months or not for another five years: The country’s potential accession would shift the balance of power dramatically. After all, despite all the quarrels with Erdogan, Turkey continues to be of high strategic value to the West – especially when it comes to dealing with regional security challenges: It is paramount for EU member states that the refugee agreement of March 2016 with Turkey remains in place. In addition, Turkey houses several key NATO military facilities that are of vital strategic importance to the alliance’s capabilities.

    With or without Turkey, the SCO continued to gain importance over the weekend in Samarkand, and Xi Jinping further expanded China’s role as a key player within the organization. Moreover, China’s leadership repeatedly manages to identify opportunities and exploit them to its benefit: Turkey’s current strategic disorientation would be one such case.

    • Geopolitics
    • Russia
    • Shanghai Cooperation Organisation
    • Shanghai Cooperation Organization
    • Turkey
    • Xi Jinping

    News

    Biden would deploy US soldiers to Taiwan

    US President Joe Biden has pledged US military support for Taiwan. In an interview with the CBS television station, Biden announced the deployment of American troops to the island nation in the event of an “unprecedented attack” by China. This is the first time Biden has implied that the United States is prepared to intervene directly in possible hostilities between China and Taiwan.

    By confirming further arms deals and increased presence in the Indo-Pacific as well as in the Taiwan Strait, Washington already signaled in recent months an increasing commitment to defend its ally (China.Table reported).

    China’s Foreign Ministry criticized Biden’s announcement and accused the US president of encouraging secessionist forces on the island. For Beijing, a possible formal declaration of independence by Taiwan is one of its red lines. For years, the People’s Republic has threatened to annex Taiwan militarily if this red line was crossed.

    In Taiwan’s capital, Taipei, however, the Foreign Ministry was pleased that Biden reaffirmed “the US government’s rock-solid commitment to Taiwan’s security.” The country announced plans to further expand its self-defense capabilities and is interested in deepening its partnership with the US on defense issues. grz

    • Military
    • Security

    Hamburg’s mayor warns against Cosco deal intervention

    On Monday, Hamburg’s First Mayor Peter Tschentscher urgently warned against rejecting the investment of the Chinese shipping company Cosco in the Port of Hamburg. Should Economy Minister Robert Habeck reject Cosco’s participation in the “Tollerort” container terminal, it would have serious competitive disadvantages for Hamburg. “A rejection of Cosco’s participation by the German government cannot be justified on the grounds of national security and independence,” Tschentscher told Reuters. It would be a heavy burden for the business site and “a one-sided, competition-distorting disadvantage for Hamburg compared to Rotterdam and Antwerp, where Cosco already owns terminal shares.”

    Tollerort is one of three container terminals in the Port of Hamburg – and the Chinese shipping company Cosco wants to acquire a 35 percent minority stake. While both Hamburg’s politicians and the business community would welcome an entry, the Ministry of Economics seems to harbor reservations (China.Table reported). An investment review procedure based on the Foreign Trade and Payments Act is currently in progress. Some believe that critical infrastructure such as a port terminal should not fall into Chinese hands, not even partly.

    Tschentscher, on the other hand, believes that in order to survive in international competition, terminal investments by Chinese shipping companies should also be possible in Hamburg. Hamburg would not be the first port with Chinese stakes. In Europe alone, Cosco has invested in 14 ports together with its partner company China Merchants, including majority stakes in Valencia and Bilbao, as well as shares in the North Range ports of Rotterdam, Antwerp and Zeebrugge. rad

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    • Germany
    • Logistics
    • Trade

    CDC recommends avoiding foreigners

    The chief epidemiologist of the Chinese Center for Disease Control and Prevention (CDC), Wu Zunyou, recommends avoiding physical contact with foreigners due to the spread of monkeypox. Any contact should also be avoided for three weeks with Chinese returning to the People’s Republic after an international journey, as well as with strangers in general, Wu said. With these behavioral tips, the physician wants to prevent the spread of infection after the first case of the disease was diagnosed in China last Friday in the western metropolis of Chongqing.

    Health authorities suspect that the disease was brought in from Germany. According to a statement by the CDC, clear matches were found with a virus strain that had appeared in Germany in late June. The patient allegedly stayed in Germany between September 2 and 8 and had sexual intercourse during that time, which authorities believe to be the cause of transmission. grz

    • Germany
    • Health
    • Monkeypox

    Bus accident triggers criticism of zero-Covid

    The deaths of 27 people in a crash have sparked criticism of China’s zero-Covid policy. The victims were passengers on a bus that crashed Sunday morning on its way to a quarantine facility in Guizhou province. Another 20 people were injured. People subsequently complained on social media about the internment of those who tested positive and their contacts in isolation facilities – until all critical comments were deleted by the censors.

    Users questioned the sense of the quarantine centers, when people could also isolate themselves at home for weeks. Infected individuals and those with a perceived increased risk of infection are often detained in quarantine facilities for weeks by authorities in many Chinese cities, even after multiple negative tests (China.Table reported).

    The predominantly agricultural province of Guizhou reported a significant increase in infections over the weekend. On Saturday, 712 infections had been diagnosed. Two out of three Covid cases on Saturday thus came from the southern Chinese province. The bus with 47 passengers crashed on a highway at 02:40 on Sunday night. Normally, occupied passenger buses are not allowed to travel on the highways between 02:00 and 05:00 in the morning. grz

    • Health

    Opinion

    At what point does cooperation lead to complicity?

    By Ralph Weber
    Ralph Weber, Professor of European Global Studies

    Just a few years ago, cooperation with partners from the People’s Republic of China was high on the agendas of numerous European players. Those who refused to participate simply failed to read the signs.

    But cooperation has become more complicated. The image of the Chinese government has suffered considerably in recent years because of its human rights crimes in Xinjiang or threats against Taiwan – to name just two aspects. Today, close cooperation with a systematic rival that has openly declared war on our democracies and values must be very well justified to avoid being caught in the crossfire of criticism.

    However, because some in the West have a lot to lose, some paint the devil of full decoupling on the wall. It is supposed to show the dangers we face if we distance ourselves too much from China. Often the devil does his job.

    Unconditional cooperation and complete decoupling represent two unattractive ends of a spectrum that needs to be considered individually for each business sector. Anyone conducting business in Xinjiang, where people are imprisoned against their will, re-educated, and forced to work in some cases, faces greater (and practically impossible) due diligence than a company producing screwdrivers in Shanghai.

    Suggests that cooperation is inherently the right path

    Cooperation partners in the People’s Republic are subject to the dictates and whims of the party-state. Some are even directly docked to the party-state. The pressure that the party-state is able to exert on private Chinese entrepreneurs is also enormous. In such a system, every cooperation is ultimately always a co-optation. The ensuing question is: How to handle this? And if you are aware of it, how transparent do you act?

    Germany’s former Minister of Defense, Rudolf Scharping, complains that “the nuances” are lost if direct and personal exchanges are not cultivated. Sober analysis is needed instead of decoupling. He pleads for cooperation. He cites trade, investment, research and development, and necessary negotiations. Without China, for example, there would be no globally viable response to climate change.

    To put it bluntly, it reads like this: Since complete decoupling (which apparently excludes even negotiations) is bad and efforts to address climate change are good, the suggestion is that cooperation per se is the right way to go. The problem is that the cooperation partner cannot be freely chosen in China, but automatically ends up in the hands of those who are responsible for the aforementioned human rights crimes in Xinjiang or the military threats against Taiwan.

    Even Scharping cannot elude the powers that be. This became apparent at the 9th German-Chinese Business Conference in Frankfurt in early September, which was jointly organized by his consulting firm and the China Economic Cooperation Center (CECC, 中国经济联络中心) and supported by the China Council for International Investment Promotion (CCIIP, 中国国际投资促进会).

    The CECC reports directly to the International Liaison Department, which is part of the Central Committee of the Communist Party of China. The International Liaison Department is responsible for the CP’s relations with other parties outside the country, historically primarily with other communist parties, but since the reform and opening-up policy also with political parties of all kinds.

    Influencing is barely denied

    Since the early 2000s, and especially under President Xi Jinping, the International Liaison Department (as well as the Propaganda Department and especially the Unified Front Work Department) has gained significance. The fact that this involves influencing, co-opting, and asserting foreign policy interests of the Chinese party-state is hardly denied.

    Recent research on the International Liaison Department also mentions Germany’s special position in Europe in these efforts. The CECC’s homepage also explicitly states the goal of promoting the “external work” (对外工作) of the CCP and implementing “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.”

    The fact that the International Liaison Department is behind the CECC can also be seen in the list of speakers at the Frankfurt conference. Shen Beili 沈蓓莉 and Liu Jingqin 刘敬钦, one current and one former top official of the International Liaison Department, attended the event. Jiang Feng 姜锋, the Party Secretary of Shanghai International Studies University, also delivered a speech in Frankfurt. The latter, in a conversation with Scharping published by the People’s Daily in January 2022, described the PRC political system “as a multi-party system” in which there are “many democratic parties” – meaning the “parties” that are under the leadership and control of the CCP and gathered in the united front.

    Cooperation with the International Liaison Department is by no means new. For instance, last year Scharping attended the Summit between the Chairman of the Chinese Communist Party and Political Parties Worldwide, which is hosted by the International Liaison Department. There, he praised the CCP several times in his speech. But the fact that cooperation with actors from the People’s Republic of China always leads to co-optation is ultimately owed to a systemic necessity inherent in a one-party dictatorship, which is China’s political system as stated in Article 1 of the state constitution and despite its cadres’ claims to the contrary. Under this system, all relations with the world are managed outside the Party and, as far as possible, subordinated to the Party agenda.

    At what point does cooperation lead to complicity?

    Those who choose cooperation, for which there may be good reasons, must find a way to deal with co-optation. Do you censor yourself to some extent because you don’t want to burden your counterpart too much, out of politeness, clever tactics or because this would help you to achieve your own interests? Or do you even explicitly echo the propaganda positions of the Chinese Communist Party, which are normalized in the process, and thus even accept the successful exercise of discourse power? At what point does cooperation lead to complicity?

    All these questions may and must be answered individually and differently in each case. But one thing is clear: If one cooperates directly with Chinese party-state institutions, one must transparently disclose this fact. This is the only way to leave it up to others to decide how far they want to be appropriate.

    Ralph Weber is a Professor of European Global Studies at the University of Basel in Switzerland. His research fields include Chinese political philosophy, modern Confucianism, and Chinese politics. He focuses on European-Chinese relations and published a widely acclaimed study on the influence of the Chinese party-state in Switzerland in December 2020.

    • Chinese Communist Party
    • Geopolitik

    Executive Moves

    The Vice President of the European Chamber of Commerce in Beijing, Guido Giacconi, has passed away. As announced by Chamber President Joerg Wuttke, Giacconi passed away over the weekend in his home country. Giacconi had been active for the Chamber of Commerce since May last year.

    Is something changing in your organization? Why not let us know at heads@table.media!

    Dessert

    Party on: After a three-month Covid break, Beijing authorities allowed club nights at selected locations last weekend. At the iWork Science and Innovation Park, hundreds of young people came together to party – cigarette breaks outside the entrance included.

    China.Table editorial office

    CHINA.TABLE EDITORIAL OFFICE

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