Neican: 3 May 2020

China Neican is a weekly China brief that brings you concise, timely, and policy-focused analysis. Neican 内参 or “internal reference” are limited circulation reports only for the eyes of high-ranking officials in China, dealing with topics deemed too sensitive for public consumption. But rest assured, everyone is welcome to read what we write.

1. Two Sessions set for May

China has announced the opening dates for its key annual political gatherings, the “Two Sessions”. The National People’s Congress (NPC) will meet from May 22; Chinese People’s Political Consultative Conference (CPPCC) (political advisory/united front body) will meet from May 21.

The “Two Sessions” usually happen in early March, but this year they were postponed due to the outbreak of COVID-19. The fact that it is happening should be taken as a signal that Beijing is moving China back to business as usual. But will things ever be the same again?

The “Two Sessions” are little more than a political ritual, since neither the NPC nor CPPCC have much real power. In fact, most decisions are largely made by the CCP Party central ahead of time. But political ritual matters for legitimacy, in Xi’s new Red Empire, just as in dynastic China.

According to China’s state media, NPC is hard at work on public health, biosecurity, quarantine, and emergency response laws. The narrative focuses on the need to enhance the legal system to manage future public health crises. But what really interests us are possible announcements on Beijing’s post-COVID economic agenda. Late last year, in looking at China’s 2020 economic plan, we thought that: 

Stability is the key theme of China’s economic policy direction for [2020]…Given the rising economic challenges domestically and an expected turbulent global environment [in 2020] stability is necessary to ensure Party legitimacy and to avoid political unrest stemming from economic troubles…

Balancing sustained economic growth with increased financial and environmental risks will not be easy. Beijing is putting its faith in its New Development Concept centered around “quality growth”. However, given the severe economic challenges that it faces, Beijing may redouble its efforts to push an “ethnonationalist” ideology for legitimization. In the international community, China’s focus on innovation and its efforts aimed at increasing influence over global economic governance institutions may find support among some developing economies; however, it will likely lead to more friction with developed economies, including the United States, the European Union, and Japan.

Much has changed in the long and arduous few months since then, not least China’s 2020 economic prospects.

2. Australia-China diplomatic row

The diplomatic row between Australia and China worsened last week after Australia called for an independent inquiry into the origins of the pandemic.

During an interview with the Australian Financial Review, China’s Ambassador Cheng Jingye 竞业 was asked if Australia continues to pursue the independent inquiry, whether China would “stop buying our iron ore and coal and gas”. The Ambassador responded that “I think if the mood is going from bad to worse, people would think why we should go to such a country while it’s not so friendly to China.” “And also, maybe the ordinary people will think why they should drink Australian wine or eat Australian beef.”

In response, Australia’s Minister for Foreign Affairs said, “We reject any suggestion that economic coercion is an appropriate response to a call for such an assessment, when what we need is global cooperation.”

This incident has escalated dramatically in the week since the Ambassador made his comments, to the extent that it has even affected diplomatic protocol. The Chinese Embassy released details of a call between the Chinese Ambassador and the Secretary of the Department of Foreign Affairs and Trade. The Department subsequently released a statement, noting that “The department will not respond by itself breaching the long-standing diplomatic courtesies and professional practices to which it will continue to adhere.”

There are debates over whether the Ambassador’s remarks in the interview constitute “economic coercion”, and whether it was a “threat”, a “warning” or something more benign. 

We think the way that the Ambassador intentionally brings up sensitive sectors for Australia, — education, tourism, wine, and beef, sectors that have been in the spotlight for debates on economic coercion — can be construed as a veiled or implied threat. This is because he is an ambassador, and ambassadors are (or at least should be) very careful with their words, especially when the bilateral relationship is strained already. It would be difficult to imagine that his words were spoken inadvertently or without any intent.

Regardless of how one characterises the Ambassador’s words, one thing is clear: he tried to influence Australia’s policy by pointing to potential economic fallout from Australia continuing to pursue an independent inquiry.

However, China is unlikely to carry out economic coercion against Australia at this point in time. China also needs imports from Australia as its economy recovers. Australia’s education and tourism industries are suffering from the pandemic, but it is not because of Beijing’s actions. But the Ambassador is right that if the bilateral relationship continues to deteriorate, it may affect certain sectors and industries in Australia. In any case, Australia should make its political system more resilient to economic coercion, and we have some ideas on how this can be done.

3. Press Freedom

Today is UN World Press Freedom Day. UNESCO’s theme for this year is Journalism without Fear of Favour.

China is ranked 177 out of 180 countries and regions in the Reporters without Borders’ 2020 World Press Freedom Index.

For a long time now, Beijing has sought to control the flow of information and the media environment in China. But this year, the screws were tightened even further. In fact, just a few days ago, Chinese authorities sentenced journalist Chen Jieren 杰人 to 15 years in jail. Chen was publishing reports and comments on social media that are critical of the Chinese government and the CCP, after being sacked from Chinese state media. He is one of the more than 100 journalists jailed in China.

Through the COVID-19 crisis, the party-state has tightened its overall control on information. Beijing sees propaganda work as a critical part of its response to the pandemic. State media was instructed to tell “positive energy” stories. Citizen journalists such as Chen Qiushi were detained for reporting on the situation in Wuhan at the height of the outbreak.

China has also expelled journalists working for the New York Times, Wall Street Journal and Washington Post, in an escalating tit-for-tat with the Trump Administration. The result can only be less critical reporting from within China. As we noted before:

“Ideological bias against China”, “fake news”, and “breaches of ethics in journalism” can encompass any reporting that reflects badly on the Chinese state, including widespread human rights abuses to Xinjiang, government corruption, and its foreign and security policy.

Truth is not the criteria; the criteria is whether it is good for the CCP or not.

Press freedom in Hong Kong is also in decline, due to pressure from Beijing. This week, two journalists were arrested for loitering before being released. The situation in Hong Kong is likely to worsen as Beijing uses policing and legal means to put pressure on democracy activists and dissidents.

4. China’s military budget and strength

According to new data published by the Stockholm International Peace Research Institute (SIPRI), global military spending total amounted to $1,917 billion in 2019, the highest level since the 2008 global financial crisis.

SIPRI data shows that US military expenditure grew by 5.3 per cent in 2019 to a total of $732 billion in 2019 while China’s grew by 5.1 per cent in 2019 to $261 billion. The difference in military spending and strength between the US and China is still large, despite narrowing in recent years.

Indeed, even though China’s military has advanced by leaps and bounds in recent decades, it still faces massive challenges to modernisation. As Bates Gill and Adam recently notes:

In Xi’s estimations, by 2020, the PLA’s mechanisation will be “basically achieved” and strategic capabilities will have seen major improvements; by 2035, national defence modernisation will be “basically completed”; and by mid-century, the PLA will be a “world-class military.”

In other words, this transformation – if successful – will take time.

At this relatively early point in the process…much more work is needed, especially more realistic training in joint operations, as well as improved leadership and greater communications integration across the services.

PLA modernisation depends more on “software” — human talent development, new war-fighting concepts and organisational transformation — than on the “hardware” of new weapons systems. This underscores the lengthy and difficult nature of reform.

Media reporting, both international as well as in China, frequently exaggerate the PLA’s progress, focusing on new weaponry over the less sexy stuff, such as training and human factors. This paints a distorted picture, and it matters because:

Underestimating the PLA breeds complacency and risks costly overreach. Overestimating the Chinese military grants it unwarranted advantage.

Similarly, for the Chinese leadership, miscalculating its military capability could lead to disaster.

Rather, it means a prudent assessment of the PLA must take its strengths and weaknesses into account, neither overestimating nor underestimating either one. Should strategic competition between the US and China continue to escalate, getting this right will be more important than ever.

This week on China Story:

In a world where interdependence is increasingly being ‘weaponized’, more attention is being paid to hidden levers of control embedded in transnational technological design and infrastructure. In an environment of growing suspicion towards China, the role of Chinese actors in this regard is increasingly scrutinised. But while the Chinese Party-state has political goals for technological development, these should not be the sole lens through which the actions of Chinese firms are perceived. The case of design for the future Internet illustrates how excessive focus on Chinese political motivations can obscure many other interests and factors involved.

Last Friday, Ambassador Cheng Jingye’s musings that people in China might reduce their consumption of Australian beef and wine exports have set off an intense, ongoing stoush between his embassy and Australian officials. But Cheng is only telling us what should already be obvious: the COVID blame game is stoking animosity towards China and its people. The fierce outrage that pundits are now directing the ambassador’s way is doubly curious when you consider that many of the same voices have long been arguing to reduce Australia’s trade dependency on China. The episode only highlights once again the deep contradictions that plague Australia’s China policy.

Is China’s ‘mask diplomacy’ a novel form of statecraft? At first glance, it might not look that distinct from humanitarian assistance delivered to victims of natural disasters. Yet there are several notable differences that make this emerging practice worthy of closer attention. The strategic effectiveness of Beijing’s ‘mask diplomacy’ remains unclear and somewhat dubious. If anything, its emergence highlights the prospect that humanitarian aid is taking on increasingly strategic dimensions.

China seems poised to emerge from the current crises stronger than before.  This will test the Sino-Australian relationship that has been characterised by mutual strategic interest and mutual distrust. Two schools of thought are emerging of the international order in a post COVID-19 world and what this entails for the Sino-Australian relationship. One is that it is transformational and will serve to reshape the global balance of power. The second is a continuation of the challenges that are faced presently which will only deepen.