The Month in U.S.-China Relations 中美关系一个月 (July 2017)

As Americans celebrated the July 4th holiday, North Korea launched what many experts believed to be its first successful intercontinental ballistic missile (ICBM). According to media reports, Kim Jong-un said it was an Independence Day present and urged North Korean scientists to “frequently send big and small ‘gift packages’ to the Yankees.” Kim sent another “gift” on July 28th, prompting a twitter riposte from President Trump: I am very disappointed in China. Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade, yet they do NOTHING for us with North Korea, just talk. China could easily solve this problem! Just four months ago at Mar-a-Lago, many saw North Korea as an opportunity for cooperation between Washington and Beijing. I wrote in the April edition that it was unlikely China could “solve” North Korea to Trump’s satisfaction. It looks like the President is coming to terms with this and realizing Xi’s fundamental interests on the Peninsula diverge from his own. 

July also marked the one year anniversary of the decision by the Permanent Court of Arbitration in The Hague. The case, which was brought by the Philippines, resulted in the tribunal rejecting Beijing’s claims of historic and economic rights in the South China Sea. The BBC reported on July 23rd that Vietnam terminated a gas-drilling expedition about 250 miles off its southeast coast “following strong threats from China.” Although the Hague ruling was seen as a legal and diplomatic blow to Beijing at the time, it seems to be business as usual in the South China Sea for China one year out.

Sandy Pho

Senior Program Associate

Kissinger Institute on China and the United States

Major Issue Tracker

China as an Emerging Superpower

China Eyes Arctic’s Economic Potential of its ‘Belt and Road’ (July 5): A new paper co-released by China's National Development and Reform Commission and the State Oceanic Administration named three sea routes in the Arctic which would be essential for China to develop a "blue engine" to promote greater economic growth…Read More>>

China Sends Troops to First Overseas Military Base in Djibouti (July 12): As reported by CNN, China has expanded its military ties across Africa. According to a report by the European Council on Foreign Relations, cooperation with Africa on peace and security is an "explicit part of Beijing's foreign policy.” Related: Satellite Photos Reveal Underground Construction at Chinese Military Base; PLA Base in Djibouti to Help China Better Perform Int'l Obligations (Xinhua).

China Climbs on Soft Power Index While Trump Pulls U.S. Down (July 18): According to an annual global ranking of soft power, China’s influence rose for the second year in a row, up to 25th worldwide from 28th last year. The U.S. dropped from first place to third, sliding for the first time since the ranking was introduced in 2015. Related: Quiet Success for China at G20 as Xi Avoids Drama and Spotlight.

The Logic Behind China’s Treatment of Liu Xiaobo (July 19): Jamil Anerlini writes for the Financial Times(subscription): The current Chinese leadership…closely studied the periods leading up to the 1917 Russian Revolution, the 1911 Chinese revolution and the fall of the Soviet Union. Their conclusion is that authoritarian systems are at their most vulnerable when they attempt to liberalize. The Chinese Communist party must therefore avoid this at all costs. Related: China’s Propaganda War Over Dying Nobel Prize Winner Liu Xiaobo; Remembering Liu Xiaobo: Analyzing censorship of the death of Liu Xiaobo on WeChat and Weibo.

IMF Could be Based in Beijing in a Decade (July 24): Christine Lagarde said relocation was “a possibility” because the Fund will need to increase representation of major emerging markets as they grow. The IMF's bylaws call for the institution's head office to be located in the largest member economy, which may be China in 10 years…Read More>>

Sri Lanka's Cabinet 'Clears Port Deal' with China Firm After Concerns Addressed (July 25): Under the new deal, which Reuters examined, Sri Lanka sought to limit China's role to running commercial operations at the port, while it has oversight of broader security.

How India and China Have Come to the Brink Over a Remote Mountain Pass (July 26): A great primer from The New York Times (subscription) with maps on the current China-India dispute in the Himalayas. Related: Hostilities in the Himalayas? Assessing the India-China Border Standoff (Video); Doklam Deadlock: India and China will Constantly Challenge Each Other, Get Used to It; 'India Has Deployed Troops in a Third Country for the First Time to Challenge China'.

Exiled Uighur Group Condemns Italy’s Detention of its General Secretary (July 28): A prominent Uighur exile was held briefly by police in Italy, his organization said, calling on the EU to investigate whether China had pressured Italian authorities to take action…Read More>>

North Korea

Russia and China Tell North Korea, U.S., and South Korea to Embrace De-Escalation Plan (July 4): The plan would see North Korea suspend its ballistic missile program and the United States and South Korea simultaneously call a moratorium on large-scale military exercises in order to pave the way for multilateral talks…Read More>>

China Trade with North Korea up 10.5 percent in First Half (July 12): China has repeatedly said it is fully enforcing UN sanctions against North Korea and that there is nothing wrong with "normal" trade with Pyongyang in areas not covered by sanctions…Read More>>

South Korean Department Stores Hit by Declining Chinese Tourists (July 25): The number of Chinese tourists in South Korea plunged 66.4% to 254,930 in June, year-on-year, following China’s travel ban to South Korea. The ban was implemented following Seoul’s deployment of THAAD, an anti-ballistic missile system aimed at deterring North Korea. China claims that THAAD infringes on China’s security and destabilizes the region…Read More>>

China Hits Back at Trump Criticism over North Korea (July 30): Following North Korea’s second ICBM test in a month, President Trump tweeted he was “very disappointed” in China and that Beijing had done “nothing” for the U.S. with regards to North Korea…Read More>>

The U.S. Rebalance to Asia

TPP to Stay Largely As Is, Minus the U.S. (July 14): According to Nikkei Asian Review, discussions on an America-less TPP did not yield concrete revisions on issues like whether to alter terms on repealing tariffs. Nor did members set terms for implementing the revised treaty.

Tillerson Eyes New Pick For Top Asia Envoy (July 24): After an intense battle with the White House over his first choice (Susan Thornton) to become the top U.S. diplomat to Asia, Secretary Tillerson is considering a new candidate (Olin Wethington) with a deep resumé in business and economics, but little diplomatic experience, BuzzFeed News learned.

Southeast Asia and the South China Sea

Three PLAN Offices May Have Revealed What China Wants in the South China Sea (July 9): Ryan Martinson and Katsuya Yamamoto write in The National Interest: Chinese strategy in the South China Sea is expansionary in aim, incremental by design and realist in orientation.

Assessing the South China Sea Arbitral Award After One Year: Why China Won and the U.S. is Losing (July 12): According to Julian Ku in Lawfare, strong, decisive U.S. action following the ruling could have significantly raised the costs for further Chinese activities in the region. But the Obama Administration ultimately chose a different path and did nothing to concretely support the award. Related: Beijing Shifts Strategy in South China Sea; Philippines Department of Foreign Affairs Statement on First Anniversary of Arbitral Tribunal Award.  

Beijing Criticizes Indonesia’s Renaming of Part of South China Sea (July 16): In an act of defiance against Beijing, Indonesia will refer to the northern areas of its exclusive economic zone in the South China Sea as the "North Natuna Sea."

Vietnam Halts Drilling after ‘China Threats’ (July 23): According to the BBC, Vietnam terminated a gas-drilling expedition in a disputed area of the South China Sea following threats from China. Related: The Week Donald Trump Lost the South China Sea (Subscription).

China Opens Cinema on Disputed South China Sea Island (July 24): As reported by CNN, China has built a top-of-the-line cinema on a tiny disputed island in the South China Sea, the latest in a series of moves by Beijing to press its territorial claims in the region. Related: The Multiplex and the Plane: China's Moves In Surrounding Seas Raise Eyebrows

Britain Plans to Send Warship to South China Sea in Move Likely to Irk Beijing (July 27): Britain would increase its presence in the waters after it sent four British fighter planes for joint exercises with Japan in the region last year…Read More>>

Military

China Upset about 'Negative' Taiwan Content in U.S. Defense Bill (July 17): The complaints came after the U.S. House of Representatives passed a bill that would expand exchanges, training, and exercises with Taiwan. Related: AIT's Chairman Isn't Optimistic That 'Dangerous' U.S. Navy Port Calls will Happen; China Says U.S. Has Apologized for Name Gaffe.

Chinese Fighter Jet Performed 'Unsafe' Intercept of U.S. Navy Plane (July 24): The Chinese J-10 fighter jet was armed and passed within 300 of a U.S. EP-3 reconnaissance plane, causing the Navy aircraft to take "evasive action," a U.S. defense official told CNN. 

China Sets up Hi-Tech Weapons Research Agency Modelled on U.S. Body (July 25): President Xi has been driving an unpre­cedented military overhaul since he took the helm in 2012, with the ambition of making the People’s Liberation Army a nimble, modern fighting force…Read More>>

China Stages High-Profile Naval Drill Off Korean Peninsula (July 30): Analysts believe the drill was designed to send a warning to both Pyongyang and Washington as concerns grow over North Korea's accelerated nuclear program…Read More>>

China Shows Off New Weapons in Huge Military Parade (July 30): The parade was part of the celebrations of the 90th anniversary of the People's Liberation Army (PLA)…Read More>>

Science & Tech, Espionage, and Surveillance

Stripe Launches Partnership with China’s Most Popular Digital Payment Platforms, Alipay and WeChat Pay (July 10): The partnership between San Francisco-based Stripe, Alipay, and WeChat Pay enables Chinese users to purchase foreign goods in dollars without having to convert to the local currency. U.S. merchants that are not in China can now accept payments from Chinese customers…Read More>>

Apple to Build First China Data Center to Comply With Cybersecurity Law (July 10): Apple aims to migrate Chinese users’ information, now stored elsewhere, to the new facility in coming months. The data center is part of a $1 billion investment by the iPhone maker…Read More>>

Japanese Agency Ranks China as Most Influential Nation in Science (July 10): China’s advances are considered to be made on the back of heavy government spending and an extensive campaign to attract talent. China's public and private spending on research is fast approaching the U.S. tally of $460 billion. Related: The Truth About China’s Cash-for Publication Policy.

China Tells Carriers to Block Access to Personal VPNs by February 2018 (July 11): The clampdown will shut down one of the main ways locals and foreigners access the global, unfiltered web. While VPNs are widely used, the technology operates in a legal gray area. Related: China Says It Will Not Disrupt Legitimate Internet Access.

China’s Next Target: U.S. Microchip Hegemony (July 27): China is aiming "to take over more and more segments of the semiconductor market," says White House trade adviser Peter Navarro, who fears Beijing will flood the market with inexpensive products and bankrupt U.S. companies…Read More>>

China’s AI Revolution (July 27): According to The Diplomat (subscription), China’s State Council issued the “Next Generation Artificial Intelligence Development Plan,” in order to make China the “premier global AI innovation center” by 2030. Related: Big Data, Big Concerns.

Education

Tsinghua University Cancels Professor's Cultural Revolution History Class (July 14): Philosophy professor Tang Shaojie taught the course in previous years and had planned to teach it again this fall. Tsinghua canceled the class weeks before the semester begins…Read More>>

Media, Soft Power, and Censorship

Why China and the NBA Have Been Waiting for Zhou Qi (July 1): "It frustrates me that there are no Chinese players in the NBA right now," commissioner Adam Silver told reporters. "There's probably more basketball being played in China than anywhere else in the world. And more NBA basketball is being watched in China than anywhere else in the world."

China’s Bloggers, Filmmakers Feel Chill of Internet Crackdown (July 3): The value of China's online video market had been expected to more than quadruple to 96.2 billion yuan ($17.6 billion) by 2020 from 2015, according to data from IHS Markit…Read More>>

Xi and Merkel Bond over Panda Diplomacy in Prelude to G-20 Summit (July 5): According to Bloomberg, Xi’s stop in Berlin before the G20 summit underscored the bond between the world’s number 1 and 3 merchandise exporters as they step into a global leadership gap left by the Trump administration.

Lights Out: China’s Summer Import Blackout Returns (July 12): The undeclared moratorium on imported, especially Hollywood, films, is a China summer tradition. Poor box office performance in 2016 saw summer showings of foreign films increase, however, and the quota of 34 foreign films allowed on Chinese screens each year has been expanded.  

Why Shanghai’s Best-Known Liberal Bookshop is Closing Down (July 16): Zhang Xuezhong, a Shanghai-based scholar, said Jifeng’s impending closure was in line with a series of moves by the Chinese authorities to tighten ideological control…Read More>>

The Noose Tightens: Financial Times' Chinese Site, Singapore's Lianhe Zaobao Blocked in China (July 18): The two media organizations are the latest to fall victim to China's new cyber law. Already, outlets like the New York Times and Bloomberg are blocked in mainland China. Last year, the South China Morning Post, Hong Kong's paper of record, joined the list. Related: WhatsApp is Being Targeted by China's Censors, Experts Say.

Censors Scrub Korean Soaps Off China’s Screens (July 20): Analysys International says 70% of China’s mobile-video users are under 30 and three-quarters watch at least 1-2 hours of videos a day. According to The Wall Street Journal (subscription), instead of American and Korean TV shows, the Communist Party wants Chinese youth to watch revolutionary-themed series. Related: Beijing Targets Foreign Firms in Internet Crackdown.

Dalian Wanda’s Wang Jianlin Bows to Disney’s Minnie Mouse (July 22): Attendance at Wang’s theme parks has been disappointing. Avisit to Shanghai Disney revealed what the parks lacked, one of Wang’s executives said — a fantasy world where visitors were immersed in familiar stories with popular ­characters…Read More>>

Trade and Economic Relations

JP Morgan Chase Allowed to Conduct Interbank Bond Settlement (July 5): The move allowed Chase into the market ahead of the official mid-July entry date as part of the 100-day plan between China and the U.S. to further open their markets to each other…Read More>>

China Focuses on Avoiding Trade War as Xi-Trump Honeymoon Ends (July 19): High-level economic talks in Washington began with tense exchanges and ended with no joint statements and no major breakthroughs. … Read More>>

Trump Nominates China Critic as Deputy U.S. Trade Envoy (July 12): The South China Morning Post reported that Dennis Shea has spoken out against state-owned firms entering the U.S. market and that, “he’s not the kind of person who will be friendly” to Beijing.

'China Drags its Feet on Opening Market to Electronic Payments like Visa and MasterCard (July 12): New guidelines issued by the People’s Bank of China suggest it could be two or more years before U.S. firms can provide those services on equal footing with the domestic champion, UnionPay…Read More>>

U.S. Firms’ Profits Up, China Losing its Appeal (July 13): U.S. businesses in China reported better profitability for the past year but are less likely to make the country their top investment priority, the American Chamber of Commerce in Shanghai said in a report in July.

Metropolis Condo Complex Ushers in a New Era of Residential Development in L.A. (July 13): The long-anticipated $1-billion luxury condo-and-hotel complex is one of a handful of mega projects being built by Chinese real estate companies looking to make a splash in Los Angeles and establish themselves as global brands…Read More>>

U.S. Toughens Stance on Foreign Deals in Blow to China’s Buying Spree (July 20): The Committee on Foreign Investment in the United States’ (CFIUS) more conservative stance coincides with growing tensions between the United States and China…Read More>>

A Grain Deal May Signal the U.S.-China Relationship Isn’t as Bad as it Seems (July 21): China will allow imports of American rice for the first time, a welcome signal after trade talks between the two nations broke down this week…Read More>> 

Xi Jinping’s Deals Blow to China Inc's Global Spending Spree (July 24): Xi’s measures bar state-owned banks from making new loans to property giant Dalian Wanda to fuel its foreign expansion…Read More>>

In China, Interest in U.S. Beef is High, But Ranchers and Feeders Need Time (July 25): It will take time for U.S. ranchers to build up the supply of cattle for China and for marketers to build demand for marbled beef unfamiliar to Chinese.

U.S. Trade Representative Says Trump will Challenge China’s Industrial Policies (July 26): Speaking on Kevin McCullough Radio, Mr. Lighthizer said there was "no question that China has an industrial policy designed to create jobs and wealth in China"…Read More>>

Foxconn Announces Wisconsin Factory in Win for Trump and Scott Walker (July 26): Foxconn, one of the world’s largest electronics manufacturers, unveiled plans to build a $10 billion factory in southeastern Wisconsin. The Foxconn factory is a break with global trends of the past 30 years. Related: Foxconn Factory In Wisconsin Is Another Bad Trump Deal.

If You Read/Watched Nothing Else in July…

The fine writing and film/videography on U.S.-China relations published each month far exceeds the assimilating capacity of any institution.  It would be ridiculous to feature “the best” efforts of the past 31 days, but KICUS would like to highlight the following work nonetheless:

Podcast

China’s Asian Power Play: Tom Miller on the Future of Belt and Road (SupChina)

Blog Posts

How the Chinese Recruit American Journalists as Spies (Nate Thayer, July 1)

Mythbuster: Beijing’s Relationship with Pyongyang (Harry Kim, Sources and Methods, The Wilson Center, July 12)

The South China Sea Seven Years On (Michael McDevitt, East Asia Forum, July 19)

Op-Eds and Essays

China’s North Korean Liability (Zhu Feng, Foreign Affairs [subscription], July 11)

Is Coercion the New Normal in China’s Economic Statecraft? (Evan A. Feigenbaum, Marco Polo, The Paulson Institute, July 25)

Reports

Insider Information: An Intrusion Campaign Targeting Chinese Language News Sites (Jakub Dalek, Geoffrey Alexander, Masashi Crete-Nishihata, and Matt Brooks, The Citizen Lab, July 5)

Russia-China Relations: Assessing Common Ground and Strategic Fault Lines (The National Bureau of Asian Research, July 2017)

Interview

Rising Tensions with China Ahead of G-20 Summit (To the Point, July 3)

Video

Henry Kissinger and Graham Allison on the U.S., China, and the Thucydides's Trap (Harvard Belfer Center, July 11)

Hostilities in the Himalayas? Assessing the India-China Border Standoff (The Wilson Center, July 27)