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By STUART LAU
with PHELIM KINE
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WELCOME TO CHINA WATCHER! I’m Stuart Lau bringing you this edition from Brussels on a day marking an unusual moment: the foreign minister of a U.N. P5 member country (yes, China) has gone missing … for a whole month. Phelim Kine will be with you from D.C. on Thursday.
TWO HEADACHES: Diplomats in Beijing are still scratching their heads about what could have happened to Qin Gang, the Chinese Foreign Minister who has not been seen in public since June 25. Hardly anyone in the diplomatic corps was buying the Chinese explanation that Qin was having health issues. But that’s not the only headache for China. The poor economic outlook for the world’s second biggest economy has prompted Beijing to seek more foreign investments from companies warned by their governments to de-risk from it. We’ll hear more below from the newly elected head of the EU chamber of commerce in China.
But first, a top scoop from my Brussels colleagues…
MILITARY SUPPLY TO RUSSIA UNCOVERED
CHINESE FIRMS SEND RUSSIA ENOUGH BODY ARMOR, DRONES, THERMAL OPTICS TO EQUIP AN ARMY
Millions of dollars worth of Chinese equipment ranging from body armor to drones is popping up on the Russian market, according to an exclusive investigation by POLITICO’s Sarah Anne Aarup, Sergey Panov and Douglas Busvine.
Russian company Pozitron imported more than $60 million-worth of "airsoft helmets," "miscellaneous ceramics," and other items from Chinese firm Beijing KRNatural in November and December 2022, according to customs data shared by ImportGenius.
Harmless-sounding: At first sight, the product descriptions in the declarations and customs records appear harmless enough — the "airsoft helmets," for example, are said to be for use in paintball games and "not for military use, not for dual use."
Sanctions and defense experts say, however, that it's common practice to mislabel dual-use goods as being for civilian purposes when they're in fact destined for the battlefield.
Drones, too: These flows check out with Pozitron's own declarations of conformity between late October and December 2022, for a total of 100,000 helmets. The declarations also reveal that Pozitron acquired a range of drones from Chinese multinational SZ DJI Technology Co., Ltd last December.
Big picture: China, despite Beijing's calls for peace, is pushing right up to a red line in delivering enough nonlethal, but militarily useful, equipment to Russia to have a material impact on Moscow's war on Ukraine.
"What is very clear is that China, for all its claims that it is a neutral actor, is in fact supporting Russia's positions in this war," said Helena Legarda, a lead analyst specializing in Chinese defense and foreign policy at the Mercator Institute for China Studies, a Berlin think tank.
You can read the full investigation here.
ELYSÉE’S NEW TONE
UN NOUVEAU MESSAGE: The French presidential office has seemingly toughened up its public playbook on China.
Speaking at the Aspen Security Forum — a gathering of foreign policy elites in the Rocky Mountains — Emmanuel Bonne, the top diplomatic advisor to President Emmanuel Macron, gave a scathing assessment of Beijing. He admitted that France had seen evidence of China supplying military equipment to Russia, and walked back from Macron’s remarks to POLITICO that suggested a transatlantic split on Taiwan.
Why does it matter? Bonne is a regular interlocutor with China’s most senior diplomat Wang Yi, and plays a central role in putting together Macron’s (at time controversial) China policy. His latest adjustment — made in the U.S. — also comes as Macron this week embarks on a trip to the Indo-Pacific, which includes France’s New Caledonia as well as non-French islands Vanuatu and Papua New Guinea. The Elysée has billed it as a trip to offer a French “alternative” to the escalating China-U.S. rivalry in the region.
Here’s what Bonne said on Friday:
— On China arming Russia: “Well, yes, there are indications that they are doing things we would prefer them not to do … Well, kind of military equipments. They — I mean, as far as we know — some are delivering massively military capacities to Russia.”
— Xi the peace-maker? “I don’t believe [for] a second that China will provide a solution for the war in Ukraine,” Bonne said. “I’d like China to demonstrate that it is a credible partner in fixing [the situation] … I don’t have the evidence yet.”
— Macron differs from Biden on Taiwan? Non: “I think the key components of our China policy — or Taiwan policy — are exactly the same as the U.S. administration. We go by the principle of the One China policy, and we want a peaceful solution to the Taiwan issue. So we are exactly on the same [footing]. Then President Macron’s travel to China at the moment when President Tsai [Ing-wen of Taiwan] was meeting the Congress leadership in California, there was a bit of volatility all around this.”
— We’ll be with you, Washington: “While we were visiting China, we had a French frigate crossing the Taiwan Strait, as we very regularly do every year, and we are probably the only Europeans to go there so often. So I mean, we are ready, and we are ready to take our responsibility to be with you in case of crisis.”
— Macsplaining continues: “The point that President Macron made in this [a.k.a. POLITICO’s] interview was about our capacity as Europeans why we are engaged into a long, protracted — potentially long, protracted — war in Ukraine to fight on two fronts. But I mean, in terms of principles, solidarity, and what needs to be done, we are exactly on the same page … What matters most is to deter China from taking action.”
— And this is what Macron warned Xi: “He conveyed very clearly the message that, ‘you should not do it, and that will have a big price, that will … force us to go for massive sanctions,’ etc. And probably much more.”
THREE MINUTES WITH … JENS ESKELUND
THE NEW CHAIR of the EU Chamber of Commerce in China, who took up the baton from the long-serving Jörg Wuttke in May, was in Brussels for a whirlwind visit a few weeks ago. Jens Eskelund, a Danish business executive specializing in shipping, told China Watcher how the Asian superpower has become quite unrecognizable to the one he first moved to 25 years ago.
THE BIG CONCERN for foreign businesses in China is the economic future of a market they once considered unquestionably powerful. “You look at the Chinese economy: real estate is struggling; fixed asset investment is relatively muted, not much growth there; their domestic consumption, not really moving.
“What is changing is when you’re sitting in an economy that is growing 10 percent per year, it’s good for everyone, everyone is growing. If you’re slowing down to 5 percent, 5.5 percent, then there will be sectors of the economy that will not be growing the same way as before.”
DE-RISKING, TRADEMARKED BY BEIJING: “It’s not Europe de-risking,” he said, when asking about the EU’s latest strategy. “As we see it, China has been through a de-risking process for at least the past decade, if not longer … We have seen all this talk about self-reliance in China, whether it’s tech, agriculture, energy … finance, cyber, digital.
“China has been through a very, very comprehensive de-risking effort,” he said. No one in their “wildest imagination” would think Europe would ever approach the level of de-risking that China has already undergone.
Confidence not picking up: “We had actually expected that business confidence would increase because we did the survey three months after the opening up of the COVID. And we thought, hallelujah, everything’s good. But what we saw was actually sort of a decrease in the overall confidence level, and a lot of that has to do with an increased level of uncertainty of where China is.”
TRANSLATING WASHINGTON
—BLINKEN BULLISH ON BILATERAL DIPLOMATIC THAW: Secretary of State Antony Blinken said efforts are underway to resolve longtime irritants in the U.S.-China relationship. "We weren't doing a lot of talking before. Now we are. We have different groups that are engaged, or about to engage, on discrete issues … that are problems … in the relationship where I believe we can, I think, get to a resolution," Blinken told CNN's Fareed Zakaria on Sunday. "These are early days. The proof will be in the results," Blinken said. Beijing wants to the U.S. to "work with China to bring bilateral relations back to the right track of sound and steady growth," Chinese Foreign Ministry spokesperson Mao Ning said in response on Monday.
—GOP SPLIT ON CHINA INVESTMENT CURBS: Republican lawmakers are divided over how severely Washington should restrict U.S. investments in China. That disagreement comes ahead of a long-anticipated executive order by President Joe Biden that will restrict the scope and scale of U.S. investments in China, giving Democrats an opportunity to paint themselves as tougher on Beijing ahead of the 2024 election year. Some GOP national security hawks want broad oversight on U.S. investment in Chinese tech businesses, concerned that American banks are helping fund Beijing's military development. But they're facing off against lawmakers with ties to Wall Street — part of the GOP's traditional coalition — who worry about expanding regulations over business abroad. POLITICO's Gavin Bade has the full story.
—GOP LAWMAKERS TARGET FORD'S CATL DEAL: Reps. Mike Gallagher (R-Wis.), chair of the House Select Committee on China, and Jason Smith (R-Mo.), chair of the Ways and Means Committee want answers from Ford CEO Jim Farley about the firm's deal with China's Contemporary Amperex Technology Co., Limited, or CATL, in February to build new $3.5 billion battery plant in Michigan. "Ford has argued that the deal will create thousands of American jobs, further Ford's 'commitments to sustainability and human rights,' and lead to American battery technology advancements. But newly discovered information raises serious questions about each claim," the lawmakers wrote in a letter to Ford on Friday. "We've received, are reviewing, and look forward to responding to this letter," Ford spokesperson Melissa Miller told China Watcher in a statement on Monday.
—KIRBY CARPS AT KISSINGER'S BEIJING ACCESS: The White House is miffed that former Secretary of State Henry Kissinger landed a meeting last week with Chinese Defense Minister Li Shangfu. "It's unfortunate that a private citizen can meet with the defense minister and have a communication and the United States can’t, that is something that we want to solve," Kirby told reporters on Thursday. Beijing has rejected Defense Secretary Lloyd Austin's repeated requests for a one-on-one meeting with Li. Kirby said the U.S. will "continue to try to get the military lines of communication back open."
MANY THANKS: To editor Tim Ross, reporters Sarah Anne Aarup, Sergey Panov, Douglas Busvine, Camille Gijs, Gavin Bade and producer Dato Parulava.
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