Neican: 7 June 2020

China Neican is a weekly column of the China Story blog 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. June 4th

June 4th is an anniversary that calls for reflection. This year especially so given how it has coincided with the George Floyd protests in the United States as well as the erosion of freedom in Hong Kong with Beijing’s plan to impose a national security law on the city.

Historical counterfactuals are always problematic, but it’s worth remembering just how close China came in the 1980s to head down the road towards some form of democratisation. Political reform was thought by many CCP leaders to be necessary and inevitable, especially in light of economic liberalisation. But hopes for political reform ended with the gunshots on that fateful summer night. Resistance from Party conservatives, the lack of public understanding and support, a frustrated public with a long list of grievances, and the eruption of protests, led to the abortion of China’s experiment with political reform.

Today, the CCP sees June 4th first and foremost as a cautionary lesson: if it’s not careful, the party’s rule will be threatened by rapid social and economic changes. The bloody history of June 4th has been censored and twisted by the CCP to ensure the citizens of the People’s Republic stay ignorant of the truth. But it is likely that Chinese citizens will one day agitate for their political rights again through resistance.

June 4th is worth remembering because it highlights contingency in history, of how things could have turned out very differently. For example, if the protests did not start until later in the year (after mass demonstrations in East Germany had started), the political climate would have been quite different.

June 4th is also worth remembering because it shows that China’s trajectory is not linear, it can change, sometimes unexpectedly. China’s illiberal direction under Xi is concerning, but the pendulum always swings back.

2. George Floyd protests

The George Floyd protests highlight the dark side of US society and undermine the US moral authority to criticise authoritarian states in violation of human rights, including China. Reflecting on the failings of liberal democracies is not the same as justifying China’s widespread human rights abuses. It is part of living up to professed liberal values that differentiate democracies from repressive political systems.

The Chinese state media and diplomats have cynically exploited the protests to highlight the inequality and flaws of American democracy as well as the hypocrisy of US policy on Hong Kong. Domestically, it feeds into a larger story about China supposedly being the oasis in a world in chaos, and that liberal democracy is fatally flawed. Internationally, it’s part of a larger campaign to undermine US credibility.

Secretary of State Michael Pompeo rebuffed China’s propaganda, stating:


The idea that the US is a beacon of freedom and progress is accepted by many in the West, but certainly not so in South America, the Middle East or Asia. There, many people see the US in a negative light due to the history of US meddling in their affairs.

While the party-state has no credibility when it comes to critiquing racial discrimination (Xinjiang) or policy brutality (Hong Kong), the latest US protests do highlight disturbing parallels between the response of the Trump White House, and Chinese and Hong Kong governments in characterising and dealing with protesters. Peaceful protesters are characterised as “rioters”, thought to be best suppressed with force, instead of citizens with genuine grievances.

This episode highlights three things. First and foremost, the best critique of China’s human rights abuses and its repressive political system is to uphold a liberal alternative that respects the dignity of individuals and the rights of citizens. Actions speak louder than words. Beijing sees Taiwan and Hong Kong as threats because both societies show that an alternative to the kind of politics that’s espoused by the CCP is possible, and indeed, preferable.

Second, in critiquing authoritarians, it is time that we first look into the mirror and reflect. Are we adopting double standards when evaluating our own actions vis-a-vis these by the Chinese party-state? Are we living up to the standards we espouse in our rhetoric? Chastising Beijing for police brutality in Hong Kong one day, and then the next day urging the US government to “send in the troops” to put down protests at home is astonishingly hypocritical.

Third, to compete effectively with China, the US must rebuild its moral authority destroyed by the Trump White House. At a time of strategic flux, US allies and partners from Europe to Asia are increasingly questioning US resolve, commitment, and character. Washington’s most urgent task in strategic competition with China is to get its own house in order. But that is an imposing challenge far beyond the power of the current administration.

3. Coordinating democracies: IPAC and D10

An “Inter-Parliamentary Alliance on China” has been launched this week. At the moment, the IPAC has two members each (they are parliamentarians rather than government officials) from 11 parliaments: Australia, Canada, the European Parliament, Germany, Japan, Lithuania, the Netherlands, Norway, Sweden, the UK, and the USA. The two members from each parliament represent different major political parties. For example, Australia has one member from Liberal and one from Labor. Canada has one from Liberal and one from Conservative. The UK has one from Labour and one from Conservative. The US has one from Democrats and one from Republican.

The IPAC’s principal work is “to monitor relevant developments, to assist legislators to construct appropriate and coordinated response, and to help craft a proactive and strategic approach on issues related to the PRC”. It focuses on five areas: rules-based order, human rights, fair trade, security strategies, and “sovereignty and institutions of any developed or emerging markets through lending, investment, or by any other means”.

Notably, there is currently no representation from the “Global South”, especially as one of its focus areas explicitly mentions emerging markets. Instead, apart from Australia, all the countries represented are members of G7 or the EU. This is one shortcoming of this group at the moment, as it only represents the interests of developed countries.

The establishment of IPAC will mean that these parliamentarians can better coordinate messages and actions in parliamentary and public debate on China. This may lead to greater pressure on their respective governments to implement “tougher” policies on China.

Speaking of G7, the US and UK have proposed an expansion of G7 to counter China. The US has proposed adding Australia, India, Russia and South Korea. The UK’s proposal leaves Russia out, with a result of a “D10” — a group of 10 democracies.

There are a few problems with such a grouping. One, “D10” is just half of “G20”. The G20 is already an established grouping. It has an annual leaders’ meeting and existing structures for ongoing work (ministerial meetings and working groups). The other G20 members not part of this D10 grouping (Argentina, Brazil, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, Turkey) are unlikely to be happy with this, as it would diminish the importance of G20.

Second, expanding the G7 invariably means more conflicting interests. For example, a country like India would have very different interests in intellectual property protection from the rest of the group. Nevertheless, these ten countries would likely have some common interests with respect to China.

The establishment of IPAC and the possible establishment of D10 shows that there are growing concerns, especially among the developed countries, with China’s increasing assertiveness internationally. Such concerns are unlikely to recede anytime soon.

4. Chinese companies on American exchanges

The White House released a Memorandum on Protecting US Investors from Significant Risks from Chinese Companies. US Secretary of State, in between meeting Tiananmen Square survivors and calling out CCP’s “obscene propaganda”, also released a statement on NASDAQ requiring auditing firms to ensure all listed companies complying with international reporting and inspection standards.

Security exchanges requiring consistent and high standards for transparency and reporting is a positive development for investors, and would be welcomed by all investors, American or Chinese. No investors want to see a repeat of Enron in 2001. Chinese companies should adhere to the same level of standard as other companies listed on the security exchanges.

However, if the aim of the “Presidential Working Group on Financial Markets” is to make it harder for Chinese companies to be listed on foreign exchanges and/or for existing Chinese companies to be delisted, then it is a very worrying development. It can potentially lead to a bifurcation of capital-raising and a step away from global financial reporting standards.

This week on China Story:

  • June 4th reflections: To commemorate June 4th, we asked our contributors to reflect on what June 4th, 1989 means to them. SHOW Ying-Xin, Rui ZHONG, Jon (Yuan) JIANG, Adam Ni, and Yun JIANG offer their personal reflections and memories.
  • Adam Ni, The future of China’s nuclear-powered ballistic missile submarine force: China finally achieved an operational underwater nuclear capability in recent years, almost six decades after it first launched its nuclear-powered ballistic missile submarine (SSBN) program in the late 1950s. The deployment of the Jin-class (Type 094) SSBNs armed with JL-2 submarine-launched ballistic missiles (SLBMs) marks a new stage in the evolution of China’s sea-based nuclear force. According to the Pentagon’s 2018 annual report to Congress on China’s military capabilities, this recent development constitutes ‘China’s first credible sea-based nuclear deterrent’. However, the effectiveness of China’s current sea-based nuclear force still faces serious challenges from geographic, operational and technological factors.
  • John Varano, The State of Victoria and China’s Belt and Road Initiative: where does it leave Victorians? The COVID-19 pandemic has ignited new debate on China’s flagship foreign policy, the Belt and Road Initiative (BRI). Australia’s relationship with China remains vitally important in facilitating its economic recovery in a post COVID-19 world and determining what the roadmap will entail. In navigating through the Victorian state government’s signing to the BRI, the ramifications for the State of Victoria going at it alone without thorough due diligence are significant. There needs to be greater clarity in understanding whether it will yield beneficial and sustainable developmental, economic and social outcomes for Victorians.