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HEARD IN BEIJING

"We have similar or identical positions on international matters"

- Xi Jinping, President

Some context: That's what Xi said about Sino-Russian relations yesterday in Vladivostok. Relations between the two countries are becoming ever closer, while relations with the West are becoming ever more frayed. Those two trends are not unrelated. More in the Tip Sheet below.

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THE TIP SHEET

DRIVING THE DAY

1. China and Russia promise to stay tight

 

Xi Jinping arrived in Vladivostok Tuesday for the Eastern Economic Forum, hosted by Russian President Vladimir Putin.

Xi’s attendance is a signal of deepening ties between the two countries. It’s his first time to attend the forum since it was launched in 2015.

Xi and Putin held talks on Tuesday. It was a bit of a lovefest.

In an increasingly tumultuous world, Xi and Putin promised that their two countries will stay tight (Xinhua):

“Regardless of the changes in the international situation, China and Russia will unswervingly promote their ties and steadfastly safeguard world peace and stability, said the two heads of state.”That’s because the two countries have convergent interests, according to Xi (Kremlin):“We have similar or identical positions on international matters, [and] broad common interests.”“China-Russia cooperation…is gaining ever more importance against a backdrop of growing instability and unpredictability on a global scale.”One area where Xi would like to see more cooperation is on technology (Xinhua):“China and Russia should…boost joint research and development of cutting-edge science and technology, Xi said.”

Get smart: China is desperate to attract foreign talent to help in technological upgrading (see Entry #8). Russia could be an important partner on that front.
 

READ MORE
CPC: 习近平同俄罗斯总统普京举行会谈
Xinhua: Xi, Putin vow to promote ties regardless of global changes
Kremlin: Press statements following talks with President of China Xi Jinping
 

FINANCE & ECONOMICS

2. Can the FSDC get the job done?

Markets are cautiously optimistic that the Financial Stability and Development Committee (FSDC) can get its job done.

Domestic commentary is focusing on the FSDC’s efforts to better coordinate policy. But commentators know this hasn’t gone well in the past:

"There have been various inter-ministerial coordination mechanisms among many ministries and commissions before."But they haven’t usually worked:"However, as far as the actual effect is concerned, many inter-ministerial coordination mechanisms have fallen into the awkward situation of "commenting with no decision, deciding with no implementation, and implementing with no result."Fingers are crossed that this time will be different:"It is hoped that the committee will truly play a leading role in strengthening inter-departmental coordination…and build an effective incentive and accountability mechanism."

Get smart: Markets are focused on this because they know the economy and financial system are fragile right now.

Get smarter: We were more confident in the FSDC a year ago, when all the regulators understood curbing financial risk was the top priority. But now policy goals are all over the place, which leaves regulators confused – not coordinated.
 

READ MORE
Securities Times: 金融委强化统筹协调 政策效果明显提升
 

FINANCE & ECONOMICS

3. China, America, and the Splinternet

Axios has a smart and interesting piece today on the future of the Chinese and American tech spheres.

They report on comments from Beijing venture capitalist Kai-Fu Lee at a recent tech conference in San Francisco:

"In a scenario that conflicts with what most experts foresee, Lee, a former executive at Microsoft, Apple and Google, paints a largely bloodless future.""American and Chinese tech titans remain thoroughly entrenched at home, retaining the loyalty of their consumer base.""In terms of business abroad, they carve out their own geographical spheres of technological influence that mostly do not overlap."

We think Lee's analysis is spot on (see the June 12, 2017 Tip Sheet).

China is seeking to be a technological superpower, and that starts by becoming technologically independent at home.

After that, the goal is not necessarily global domination, but creating a sphere of influence through the Belt and Road Initiative.

Welcome to the beginning of the splinternet.
 

READ MORE
Axios:  The future of U.S.-China tech fiefdoms
 

POLITICS & POLICY

4. Military cooperation with Russia reaches new highs

While Xi and Putin were reaffirming ties in Vladivostok, their two militaries were taking part in the huge Vostok war games nearby (SCMP):

“The five days of war games got under way on Tuesday at five military training grounds in Russia’s Far East region, and in the waters of the Sea of Japan (or East Sea), the Bering Sea and the Sea of Okhotsk.”The games mark an expansion in the scope of bilateral military cooperation:“’The focus of the drill has expanded from anti-terrorism to allied defence and counter-attack,’ China’s defence ministry said in a statement.”“[It also] signifies that the political strategic trust and military cooperation between China and Russia has reached a historic high.”

Get smart: These war games mark a major turning point in bilateral relations. Previously the Vostok games had been about preparing for war with China. Now the Chinese are taking part in them. It’s a clear signal of just how strong ties between the two have become.
 

READ MORE
SCMP: China’s military learns the art of the counter-attack at Russian war games as US tensions rise

 

POLITICS & POLICY

5. Ties with Russia will get stronger

Better ties with Russia have been a hallmark of Xi’s administration. Don’t forget that his first overseas trip as president was to Moscow in 2013.

Here is what we said about ties with Russia in 2015:

“The Sino-Russian relationship is at an historic high point. Many analysts predict that relations will regress to their historical mean of suspicion and competition. This may be true in the long run, but there is no reason to believe that ties between the two countries will weaken any time soon. The reasons are simple: cooperation between the two is mutually beneficial economically, politically and diplomatically.”“Economically, Russia needs Chinese money and China needs Russian oil, gas, agriculture and technology."Politically, the two share a concordance of views on information control, ‘internet sovereignty’ and restriction of foreign NGOs.”“Diplomatically, both are seeking to counter Western influence in their respective regions."“It also doesn’t hurt that the two leaders seem to genuinely respect each other.”“None of the above looks likely to change in the near term; if that’s the case, it is unlikely that bilateral ties will weaken.”

Get smart: Three years later, the convergence of interests is even stronger, as tensions with the West have increased markedly for both countries.
 

READ MORE
CPW: China Politics Weekly No. 53
 

POLITICS & POLICY

6. Tough talk from Fu Ying

As tensions with the US escalate,Madame Fu Ying has some choice words in a recent Bloomberg editorial.

A little about Fu: Fu is a former vice minister of foreign affairs and former ambassador to the United Kingdom. She is currently vice chairperson of the National People's Congress Foreign Affairs Committee.

Fu tells the US not to point fingers:

“Finger-pointing and hurting each other won’t solve any problems.”But then Fu does some finger-pointing of her own:“Many in China believe that the root causes of U.S. troubles lie within — and therefore need to be solved by Americans themselves.”“We can see that the U.S. system requires a major overhaul to overcome deep sociopolitical divisions and economic disparities.”She also calls much of American post-Cold War foreign policy a “failure.”

Nonetheless, China is still willing to work with the US:“For its purposes, there’s every reason for China to maintain an attitude of ‘constructive cooperation’ with the U.S.”But cooperating is not the same as backing down:"Make no mistake: The Chinese people will stand firm against U.S. bullying over trade."

Get smart: Prospects for SIno-US relations get bleaker by the day.

Go deeper: Read Fu’s entire piece – it’s worth it.
 

READ MORE
Bloomberg: How should China respond to a changing U.S.?
 

POLITICS & POLICY

7. Officials increasingly nervous about trade war

Fu Ying and other official voices keep saying that China can weather the trade war (see yesterday’s Tip Sheet).

But behind the scenes, anxiety is growing, according to a long piece by Tom Mitchell in the FT:

“’In 2017 the mood in Beijing was, ‘everything is going great’,’ says one person who has met Liu He, Mr Xi’s economic tsar, and other top Chinese officials in recent weeks.”“This spring they thought Trump’s tariff threats were a road bump.”“Now they know it’s not a road bump and even if Trump dies tomorrow, this problem is not going away.”“They also realise they have trade problems with Europe.”What really worries Beijing is a united front between the US, Europe, and Japan.

Unfortunately, for Beijing, that looks increasingly likely:“On August 23, …[there was] was an unusual trilateral forum that [brought] together trade officials from the US, EU and Japan."“Their mission: to combat the allegedly unfair trading practices by unspecified ‘third countries’”.

Get smart: It doesn’t take a genius to guess which “third country” they are talking about.

What to watch: Xi met with Japanese Prime Minister Shinzo Abe today in Vladivostok.
 

READ MORE
The Financial Times: Trade wars: China fears an emerging united front
 

POLITICS & POLICY

8. Ministry of Science and Technology wants more international talent

The Ministry of Science and Technology’s (MoST) new organization plan is out.

Some context: Following the MASSIVE government reorganization unveiled in March, many ministries are restructuring. Check out our sweet visualization of the re-org here and in the link below.

One big change for MoST: It is now tasked with attracting top experts from around the world.

 The ministry has two new departments:

Department for Servicing Foreign ExpertsDepartment for Attracting Foreign Intellectual Capabilities 

Some context: Previoiusly, the State Administration of Foreign Expert Affairs was in charge of attracting foreign talent. That agency has now been rolled in to MoST.

Get smart: The re-org makes sense. MoST knows better than anybody what capabilities the country needs.

Get smarter: It takes time to develop domestic talent. So attracting foreign talent is the quickest way to accelerate China’s ambitious technology goals.

The rub: Xi’s increasingly politicized approach to education and technology (see yesterday’s Tip Sheet) will act as a deterrent to some foreign experts coming to China.
 

READ MORE
SCOPSR: 科学技术部职能配置、内设机构和人员编制规定
Trivium: The New Chinese Government: After the 2018 Restructure

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