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By STUART LAU
with PHELIM KINE
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WELCOME TO CHINA WATCHER. This is Stuart Lau, reporting from Westminster, where a major China spy scandal has erupted over the past 48 hours or so, striking right at the heart of British parliamentary democracy. We’ll also have all the latest from New Delhi, where the Chinese premier was pretty much sidelined when some of the G20 heavyweights helped India plot a Belt and Road alternative. As usual, Phelim Kine will have the full U.S.-China updates on Thursday.
SPYING SCANDAL
ALLEGED MOLE IN BRITISH PARLIAMENT: U.K. lawmakers returned to the legislature on Monday amid news that China had reportedly planted a highly impactful mole in their workplace — in the form of a parliamentary aide who was revealed to be one of two alleged spies working for Beijing and under arrest for half a year, after having established links with officials and lawmakers, including the chairwoman of the influential Foreign Affairs Committee. While British police have yet to decide on the next step, with the suspects’ bail valid until early October, the scandal has already engulfed the China policy circle in Westminster like never before.
HE’S EVERYWHERE: The person, in his 20s and not named by most media outlets, was an active figure in Parliament. He had connections not only with Alicia Kearns MP, the committee chair, but also Tom Tugendhat, who is now security minister in the government. Those close to Tugendhat insisted the two ceased contact following his ministerial appointment.
The Times newspaper, which broke the story over the weekend, said the suspect had been rubbing shoulders with top officials. When the suspect started working in parliament he began building a network of people interested in China policy, contacting journalists to arrange meetings and hosting fortnightly drinks sessions, Eleni Courea writes in to report. He also sat in an interview this publication conducted with a senior foreign policy lawmaker two months before his arrest.
MESSAGE TO CHINA, PM TO PM: In his weekend meeting with Chinese Premier Li Qiang on the sideline of the G20 summit in New Delhi (more on the event below) British PM Rishi Sunak personally intervened. Sunak was "emphatic" with Li that actions to undermine British democracy are "not acceptable and will never be tolerated,” he told British lawmakers on Monday.
APPALLED! The prime minister also said he was "appalled" about the reports, adding that the "sanctity of this place must be protected.” "We will defend our democracy and our security,” he said, according to my colleague Emilio Casalicchio.
BUT BUT BUT: Not everyone in Sunak’s government is happy with his refusal to categorize China as a “threat,” especially in the wake of this incident. Home Secretary Suella Braverman as well as Tugendhat favor such a designation, while Business Secretary Kemi Badenoch said that declaring China a threat would "escalate things.” More on the Times.
What next: Tim Loughton, a Tory MP sanctioned by Beijing, called on ministers to add China to the "enhanced" tier of the Foreign Influence Registration Scheme, as former MI6 boss Alex Younger proposed on BBC Radio 4 this morning.
BEAR IN MIND: The suspect in question has denied the allegations via a statement from his legal reps. He said "it is vital that it is known that I am completely innocent. I have spent my career to date trying to educate others about the challenge and threats presented by the Chinese Communist party. To do what has been claimed against me in extravagant news reporting would be against everything I stand for."
Where recollection differs: According to Luke de Pulford, executive director of the Inter-Parliamentary Alliance on China, “from the moment [the suspect] came to Westminster, some MPs and journalists started going quiet on me. I remember thinking how weird it was that the MPs he was close to didn't back [some of] IPAC's efforts.”
ANYWAY, AIDES ARE AFRAID: The exposé dealt a big blow to London’s small-but-growing China policy circle. A policy advisor said: “It's hard to trust anyone in the field now. This is a real shock.” A parliamentary aide said "everyone who had come into contact with him [the suspect] is feeling angry and exposed."
Keep reading: Here’s the write-up by Esther Webber and yours truly this morning.
BIZ COMMUNITY CALLS FOR CAUTION: “I see an increasing number of individuals and news outlets in the U.K. suggesting that the U.K. shouldn't do business with China; wilfully oblivious to the jobs, taxes, financial benefit and global security that two-way engagement brings,” said Julian Fisher, chair of the British Chamber of Commerce in China, who wrote a post on LinkedIn after finding his face on one of the photos used by the Times article despite having only attended a Parliamentary event together with the accused among others. “It is not, yet, a crime for a British national to advocate for the growth and success of British business in China.”
BEIJING DENIES INVOLVEMENT: Perhaps the least surprising part of the story is Beijing’s reaction.
"The claim that China is suspected of 'stealing British intelligence' is completely fabricated and nothing but malicious slander," said a spokesperson of the Chinese embassy to the U.K. "We firmly oppose it and urge relevant parties in the U.K. to stop their anti-China political manipulation and stop putting on such self-staged political farce."
In other UK news: The Bank of England is facing pressure to probe the London Metal Exchange due to its links with Hong Kong. City A.M. has more.
EU-CHINA LATEST
TRADE TALKS IN TWO WEEKS: A senior EU trade figure will fly to Beijing in two weeks for the latest round of high-level EU-China economic and trade dialogue penciled for September 25, according to a Council document. Camille Gijs writes in to report. This will mark the latest in a series of stepped-up economic engagements between Europe and Beijing, amid the West’s calls for de-risking.
On the list: Chinese Vice-Premier He Lifeng is expected to host the meeting in Beijing with European Commission Executive Vice-President Valdis Dombrovskis. The date of the meeting was included in the document dated Friday. A Commission spokesperson said the date for the dialogue was not yet "fully confirmed."
In an unusually high-level preparation: Dombrovskis' chief of staff Michael Hager flew to China last week to lay the groundwork for the the meeting, according to two diplomats.
Ukraine focus too? Apart from trade, Dombrovskis has also been a vocal supporter of Ukraine. A former Latvian prime minister, Dombrovskis recently involved a visiting Chinese official in a lengthy discussion lambasting Moscow’s war, to such an extent that the Beijing guest had to ask him to stop — or he might get into trouble back home, according to a diplomat with knowledge of the intense discussion.
EVs PICK UP THE MOMENTUM: News of the date of the trade dialogue comes as Paris is piling pressure on European Commission President Ursula von der Leyen to announce a new probe against Chinese electric vehicles in her annual State of the Union speech tomorrow. "It wouldn't hurt to have it in the State of the Union, because it's vital for the automotive industry as part of the industrial sector. It would be quite satisfying to see there is movement,” a French official told POLITICO.
Berlin’s not eager: Germany, Europe's top carmaking nation, opposes any punitive measures given its major brands are heavily exposed to the Chinese market with much to lose from any trade war. "If they start with protectionism it's an own goal,” said Martin Benecke from consultancy S&P Global Mobility. "The French don't have such a big problem as they aren't so active in China, but for the German carmakers … they will do anything to avoid [trade barriers]," he added.
For further reading: My colleagues Barbara Moens, Joshua Posaner and Nick Vinocur got this must-read on the EU’s EV debate.
G20 WITHOUT XI
LI TOOK OVER THE SHOW: With Xi Jinping absent from the G20 leaders’ summit for the first time since he became Chinese President in 2012, Premier Li Qiang led the delegation to New Delhi last week, where he met U.S. President Joe Biden, von der Leyen and European Council President Charles Michel, among others.
Speaking to the hawk, Li told von der Leyen that “de-risking and cooperation are not mutually exclusive.” “One should not simply equate interdependence with insecurity, nor should they overstretch the concept of security and politicize economic issues,” he added. (Read: That’s you, Ursula.)
In her version: Von der Leyen didn’t hide her displease about China’s current relationship with Russia. “When it comes to the war, we hope China can play a positive role in achieving a just and lasting peace in Ukraine.” (Read: Your role isn’t that positive, Qiang.)
NOW COMES THE GRAND PLAN: In a bid to rival China’s Belt and Road initiative, the U.S., EU and Middle Eastern countries joined hands with India to unveil a new “India-Middle East-Europe Corridor” project. According to the plan, Indian goods would be shipped to the UAE, where a railway will take the goods through Saudi Arabia, Jordan and Israel, before being shipped off to Europe. Analysts, however, noted the lack of efficiency for these shipments, as opposed to a direct rail link between China and Europe via Russia.
Talking of Belt and Road: Italy’s Prime Minister Giorgia Meloni told her Chinese counterpart at G20 in private that she’d decided to leave Belt and Road, but she wanted it to be an amicable break-up. Bloomberg has more. In a press conference, Meloni said terminating BRI wouldn’t turn Italy-China relations negative.
XI, PUTIN NO-SHOW GODSEND FOR WASHINGTON: Biden's team didn't hide its glee that Xi’s absence at G20 surrendered the limelight to the U.S. president and host Indian Prime Minister Narendra Modi.
Biden's photo moment with the leaders of India, Brazil and South Africa — the three democracies of the BRICS consortium that also includes Russia and China — telegraphed Biden's vision of a U.S.-anchored multilateral world order that defies Beijing and Moscow's autocratic ambitions. Jon Finer, Biden's deputy national security adviser, hinted that the photo op was a near-explicit signal to Beijing, POLITICO's Alexander Ward reported from New Delhi. "Some have speculated that China's absence indicates that it is giving up on the G-20, that is building an alternative world order, that it will privilege groupings like the BRICS," Finer told reporters.
Biden-Modi brofest: Biden returned home with agreements that draw India into closer partnership with the U.S. on defense and security matters. India is a member of the Quad — an informal geopolitical grouping that also includes the U.S., Australia and Japan — but Russia has long been New Delhi's weapons supplier of choice. Biden sealed deals with Modi that make India "a hub for the maintenance and repair of forward-deployed U.S. Navy assets and other aircraft and vessels" and to deepen defense collaboration "in emerging domains such as space and artificial intelligence," the leaders' joint statement said. That will concern Beijing given rising tensions in recent years over the disputed China-India land border.
TRANSLATING WASIHNGTON
POTUS IN HANOI: After India, Biden jetted off to Vietnam. The new U.S.-Vietnam Comprehensive Strategic Partnership agreement sealed in Hanoi is proof "that the United States is a Pacific nation, and we're not going anywhere," Biden told reporters in Hanoi on Sunday. The deal is an upgrade on the existing pact between the two countries with initiatives including U.S. assistance to Vietnam's semiconductor manufacturing sector and joint cooperation in artificial intelligence research, said a joint statement by Biden and Vietnam's General Secretary Nguyen Phu Trong.
Old habits die hard: But that agreement doesn't mean that Hanoi is ditching its closer historical — if complicated — ties with Beijing and Moscow. Hanoi has been hatching a plan since March to buy weapons from Russia —despite Moscow's pariah status for its war on Ukraine — because Vietnam "still identifies Russia as the most important strategic partner in defense and security," the New York Times reported.
Don't worry, Beijing! Biden stressed that his move to deepen ties with Vietnam wasn't aimed at its giant neighbor China. "It’s not about containing China; it’s about having a stable base in the Indo-Pacific," Biden told reporters in Hanoi. That wasn't convincing – the majority of the questions that Biden took from reporters were about China, not Vietnam.
Here are some of Biden’s key responses during the trip, edited for length and clarity:
Biden's chat with China's Premier Li Qiang at the G20: "We talked about stability. It wasn't confrontational at all."
Beijing's economic problems may protect Taiwan: "China has a difficult economic problem right now for a whole range of reasons. I don’t think it’s going to cause China to invade Taiwan. And matter of fact, the opposite – [China] probably doesn’t have the same capacity that it had before."
No to decoupling: "We’re not looking to decouple from China. What I’m not going to do is I’m not going to sell China material that would enhance their capacity to make more nuclear weapons, to engage in defense activities that are contrary to what is viewed as most people would think was a positive development in the region."
Biden wants a meeting with Xi: "I hope I get to see Mr. Xi sooner than later. I’ve spent more time with him than any other world leader has, sum total, over the last 12 years. So, I hope we get to see him again soon."
Biden not talking to Xi since November isn't a problem: "It’s not like there’s a crisis if I don’t personally speak to him."
Xi may be too busy to talk to Biden: "He has his hands full right now. He has overwhelming unemployment with his youth. One of the major economic tenets of his plan isn't working at all right now. I'm not happy for that. But it's not working. So, he's trying to figure out, I suspect — I don't know — just like I would, trying to figure out what to do about the particular crisis they're having now. I just think that there are other things on leaders' minds, and they respond to what's needed at the time. And look, nobody likes having celebrated international meetings if you don't know what you want at the meeting, if you don't have a gameplan. He may have a gameplan; he just hasn't shared it with me."
MORE HEADLINES THIS WEEK
BBC: Elusive Ernie: China’s new chatbot has a censorship problem.
Bloomberg: U.S. probes Made-in-China Huawei chip.
Financial Times: U.S. House panel plans Taiwan war game with Wall Street executives.
Foreign Policy: Deterrence in Taiwan is failing, via Hal Brands.
South China Morning Post: Chinese workers' social media pic shows PLA is likely building new warship.
MANY THANKS TO: Editor Christian Oliver, reporters Esther Webber, Emilio Casalicchio, Eleni Courea, Camille Gijs, Barbara Moens, Josh Posaner, Nick Vinocur, Alexander Ward, and producer Seb Starcevic.
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