Chip War | US National Defence Strategy | Rishi Sunak | Germany-China | China-Russia
Discover more from Sinification
Chip War | US National Defence Strategy | Rishi Sunak | Germany-China | China-Russia
Welcome to the third edition of Sinification – a newsletter focusing on foreign affairs as viewed from China.
This week’s edition looks at the following topics:
US-China chip war: Chinese consultancy ICWise calls on Beijing to adopt “strong” measures in response to US export controls.
US National Defence Strategy: Fudan professor Zhang Jiadong analyses its key messages.
UK-China: Chinese experts react to Rishi Sunak becoming Britain’s new prime minister.
Germany-China: Chinese analysts hopeful that Cosco deal and Scholz visit might signal improvement in relations with Berlin
China-Russia: CASS researcher Li Shuangshuang analyses China-Russia cooperation dynamics and former PLA colonel Zhou Bo calls on Beijing to do more to prevent Russia from using nuclear weapons.
US-China chip war: Chinese consultancy ICWise calls on Beijing to adopt “strong” measures in response to US export controls.
So far, Beijing’s response to the US’s most recent clampdown on China’s chip industry has been relatively muted. It has described US measures as “technology bullying” but has not retaliated in kind. The following are excerpts from an article published a few days ago by the Shanghai-based consultancy ICWise (芯谋研究). The piece is interesting in openly calling on the Chinese government to do more in reaction to the US’s crackdown. It also provides some suggestions on the type of measures that Beijing could adopt. The extent of ICWise’s influence on government policymaking is unclear. In an article published on Monday, it claims to have had “in-depth discussions with many senior government and corporate executives” (很多政府和企业高层与芯谋研究进行了深入的沟通).
“Both upstream and downstream [in the semiconductor supply chain], the situation is grim [严峻].”
“It is time for China to take strong measures to redress the situation.”
“The US sanctions are constantly trying to test China. The current wave of US sanctions is a combination of both real and unreal measures. Some of these are real moves that leave [us] no leeway whatsoever, but others are merely rhetorical and there to test us. The latter must be dealt with proactively.”
“On the one hand, these measures are in serious violation of WTO principles and are morally difficult to justify even in a Western context. On the other, they will cause significant losses to international firms. It will therefore be difficult for the US to achieve its objectives. But the reason why the US has put out one tough statement after another is to test how China will respond and how foreign companies will react. If China does not come up with countermeasures, foreign companies will not have a reason to complain to the US. If there is no ‘tacit’ [默契] agreement between China and these foreign companies, then the US’s unrealistic measures will actually become a reality.”
“The US is currently like a peddler with a stern voice demanding an exorbitant price. If China does not [attempt to] slash this price and draw a red line, then he will really have his own way. [If China were to simply give in,] foreign companies would also find it difficult to resist US pressure on their own.”
“In the face of escalating US sanctions, we suggest that all relevant [government] departments implement [the following] countermeasures”:
“First, countermeasures should be introduced quickly in response to the sanctions … There are currently different voices and different camps among foreign firms. One side is waiting to see how China will respond and hopes to continue advancing its cooperation with China or even increase its investments in China. The other side is slashing its investments in China and rushing over to the US. However, if China does not come up with appropriate policies, the voice of those foreign companies seeking to cooperate with, and invest in, China will become weaker and weaker, and these companies will be left with no reason to put up a fight [外企师出无名]. This in turn will lead to a growing voice [from those] seeking to obey Washington and increase their investments in the US. This would be extremely detrimental to China. Therefore, it is time for us to come up with a [suitable] response.
“Second, there should be clear rewards and punishments … International companies should be given rewards commensurate with the degree of their support for China's semiconductor industry. [However,] US firms and individuals who play a negative role … must be punished.”
“Third, the Chinese government should draw a red line in key areas. If the US were to continue imposing unscrupulous sanctions [on China], we should respond in kind by imposing sanctions on specific US companies.”
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Shortly after the US export controls were announced, Gu Wenjun (顾文军), ICWise’s chief analyst and a well-known expert in China’s semiconductor industry, wrote a hard-to-come-by opinion piece on these new measures for the Chinese media outlet Caixin. Here are some excerpts that I have already posted as a thread on Twitter (@thomasdggeddes):
“Although sanctions were expected, I was still extremely affected when I saw the details. The impact of the new sanctions is huge, particularly for our memory industry."
"Although the marginal effect of these sanctions is weakening, the US government [clearly] does not even care if they hurt US companies. China has to let go of the assumption that … there will always be a limit to the extent of US sanctions. The reality now is that the US is determined to use chips as a tool to contain China, and will go to any extreme to achieve its goals. There is no chance of reconciliation."
“Our memory industry is still in its infancy and only just learning how to walk. It has taken a direct blow to the head. The pressure on our [semiconductor] memory firms to survive and develop is huge."
"US companies are not the same as the US government, foreign companies are not the same as US companies, and foreign governments are not the same as foreign companies. Where there are cracks is where the sun will shine in. It is [now] even more important [than ever] ... to seek the solidarity and cooperation of non-US countries. The global semiconductor industry has developed to the point where it is no longer dominated by the United States alone. With an open mind and a huge market, establishing cooperation with non-US companies can lead to a win-win situation."
"The rising wind forebodes the coming storm ... We have to deal with this situation in a professional and pragmatic manner. The tougher the challenge, the greater the opportunity to perfect one’s art. Every member of our domestic chip industry should embrace the spirit of unremitting struggle to build a new force for China."
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And for those who missed the previous edition of Sinification, I recommend a report published by Fudan Development Institute last week analysing the US’s tech crackdown on China . A short summary and key excerpts can be found here:
US National Defence Strategy: Fudan professor Zhang Jiadong analyses its key messages.
An in-depth analysis of the US’s new National Defence Strategy, published last week, has yet to emerge in China. A short analysis by Zhang Jiadong, which has been cross-posted by several Chinese think tanks and media outlets, is nevertheless worth noting. Here are some key excerpts:
“The main elements of this report are in keeping with the previous version from 2018.”
“The report also makes clear that the future development of the US military will be structured around the characteristics and evolution of China’s military capabilities.”
“It would appear that the US is seeking to engage in a general ‘war’ with China in the high-tech military sphere.”
“The 2022 strategy also shows that the trend towards the militarisation of space is becoming more obvious. The likelihood of a space arms race has increased.”
“There are also a couple of changes in this report [i.e. compared with the 2018 strategy] that are of note. The first is that Russia's importance in the US’s defence strategy continues to decline … This seems to indicate that the US no longer considers Russia to be a strategic-level adversary.”
“The second is that the US has elevated the importance of nuclear deterrence [美国提高了核威慑的调门] and introduced a new concept of ‘integrated deterrence’ … The US makes it clear in this report that it would take decisive retaliatory measures against a nuclear attack in order to deter potential nuclear conflicts [from happening].
“In short, it is clear from the [US’s] National Defence Strategy that its military does not currently expect to engage in large-scale warfare in the short term. Washington sees the threat from Russia as ‘urgent but not significant’ and the challenge from China as ‘significant but not urgent’. The US strategy towards China remains one of not shying away from competition and confrontation, but nevertheless striving to avoid direct military confrontation [with China]. In the US-China relationship, the strategic bottom line [on both sides] of not seeking direct military conflict remains in place and the fundamental strategic mutual trust has not disappeared.”
“However, the US has also further clarified the objective of its strategy towards China, which is to work hard in order to stop China from gaining an advantage in key areas. Since the US and China cannot directly determine who is superior or inferior in the military sphere, the battle for ‘superiority’ is likely to take place mainly in the economic sphere, at the heart of which will be the competition over the capacity for high-tech innovation and the ability to secure key supply chains.”
UK-China relations: Chinese experts react to Rishi Sunak becoming Britain’s new prime minister.
Reactions to Rishi Sunak’s anointment last week as Britain’s new prime minister have, on the whole, been relatively upbeat among Chinese political analysts. The contrast with Truss, widely criticised for her so-called “anti-China” (反华) posturing and recent economic policies, probably helped. Although hopeful, Chinese experts still seem unsure what to make of Sunak’s views on China and are very much waiting to see what happens next. His call for a “mature and balanced relationship” with Beijing continues to be widely quoted in China, but his more hostile policy pledges made during the Tory leadership contest a couple of months ago did not go unnoticed. Interestingly, discussions in China have also been focused on the potentially positive impact that Sunak might have on the deepening of ties between London and New Delhi. This is not necessarily a good thing for Beijing. Below are some reactions to Sunak’s new premiership:
Ding Chun (丁纯) – Director of the Centre for European Studies at Fudan University
“He is not a 'hawk' [like Truss]. In my opinion and judging from the current situation, relations with China should be relatively stable during his tenure. He does not appear to be in a position to actually promote cooperation with China at the moment, but deliberately messing up relations with China wouldn’t do him much good [either] and would be of no help in his dealing with the [current] crisis."
“Sunak is probably very aware of the potential for mutual cooperation between China and Britain and of the importance of economic cooperation with China for the development of the United Kingdom as well as Europe."
Qiu Jing (邱静) – Researcher at the Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS)
“Saving the economy is the [UK’s] main problem. This is also Sunak's forte … Looking around the UK’s political scene, be it Labour or the Liberal Democrats, there is no [other] party that can come up with better economic policies and no better person who is able to solve difficult economic problems.”
Wang Yanxing (王衍行) Senior Research Fellow at the Chongyang Institute for Financial Studies, Renmin University of China.
“What qualities and skills will this new Prime Minister draw on when tackling the current crisis?”
“The first is [his] integrity … Unlike most politicians, Sunak's words are consistent with his actions … The second is [his] humility … He stands in stark contrast to Truss, who, after becoming Prime Minister, acted in a self-righteous manner and ended up ‘lifting up a rock and smashing it on her own feet’ when dealing with a major issue. The third is [his] education … The fourth is [his] experience. Sunak has experience in both politics and business … The fifth is [his] pragmatism … The sixth is [his] care for others.”
“What is encouraging is that Sunak already has convincing qualities and experience, which is half the battle.”
Liu Zongyi (刘宗义) – Secretary-general of the Centre for China-South Asia Cooperation at Shanghai Institutes for International Studies (SIIS)
“Sunak once argued that the UK should pursue a mature and balanced policy towards China, cooperating where cooperation is needed and competing where competition is needed … However, he has also emphasised the so-called ‘China challenge’ (‘中国挑战’), worrying that China's rise could pose a systemic challenge to the Western world in terms of both security and ideology. So in this respect, he believes that China must be checked and balanced.”
Yin Zhiguang (殷之光) – Professor of International Politics at the School of International Relations and Public Affairs of Fudan University.
“After pressure from the US, the Johnson government's attitude towards China completely changed and the 'use China to replace Europe' rhetoric largely disappeared. Sunak is essentially continuing on this same old trajectory. This is nothing to be surprised about."
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For a more detailed overview of how the recent souring of Sino-British relations has been perceived in China, see: “UK-China relations: From cautious optimism to disillusioned pessimism”.
Germany-China: Chinese analysts are hopeful that the Cosco deal and Scholz’s visit might signal an improvement in relations with Berlin
Last week, Germany’s government allowed Cosco, a Chinese shipping conglomerate, to buy a stake in Tollerort, a container terminal in Hamburg. The acquisition was backed by the German Chancellor, Olaf Scholz, but met strong opposition from within his governing coalition. Unsurprisingly, such news was welcomed in China after months of tense relations with Berlin. On Friday, Scholz, accompanied by a delegation of German business leaders, is due to make his first visit to China since becoming Chancellor.
Wu Huiping (伍慧萍) – Deputy director of the Centre for German Studies at Tongji University
“[COSCO's acquisition] underlines that German Chancellor Scholz is still relatively steady and pragmatic vis-à-vis developing relations with China. The fact that he withstood pressure to push through this acquisition shows that he wants the pragmatic and cooperative relationship between China and Germany to continue. This also helps inject stability into Sino-German relations.”
Wu Huiping in a different article:
“Scholz's move extends the steady and pragmatic policy approach to China of previous German chancellors such as Merkel – putting economic cooperation at the centre of Sino-German relations … At the same time, Scholz is also sending a certain message to those within Germany, that is: although the Greens are currently running the country’s foreign ministry, Germany’s most important foreign policy-making power still lies in the hands of the chancellor.”
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One quick comment here: Scholz’s “weakness” within his coalition government is something that Chinese analysts have been bemoaning almost since he came to power in December last year. They knew that Scholz was among the least China-sceptic members of Germany’s coalition government, but they were not expecting him to be able to impose his authority. Until very recently, most Chinese analysts were predicting that relations with Berlin would deteriorate further. Just a few months ago, Wu Huiping herself was commenting that, “In future, Sino-German relations will become increasingly complex. Germany is set both gradually to strengthen its geopolitical and values-based choice of sides and to reduce its [economic] dependence on China.”
Tian Dewen (田德文) – Researcher at the Institute of Russian, East European and Central Asian Studies, Chinese Academy of Social Sciences (CASS)
“Scholz's forthcoming visit to China is a sign of Berlin's strong desire to encourage the further development of Sino-German cooperation at an important point in time, that is, right after the 20th Party Congress and just as Chinese-style modernisation is embarking on a new journey.”
“Take, for example, the Chinese company [COSCO’s new] stake in the German port of Hamburg … Scholz responded on the 27th that the government's decision was ‘the right one’. This clearly demonstrates the Scholz government's rational and pragmatic approach to promoting cooperation with China. This is particularly positive at a time when the US is interfering in Europe's cooperation with China and at a time when the EU is calling for more stringent screening of foreign investments.”
“Scholz's upcoming visit to China indicates that the resilience of Sino-German relations remains strong and that there is still plenty of room for cooperation between Germany and China.”
Ding Chun (丁纯) – Director of the Centre for European Studies at Fudan University
“Germany's upcoming visit to China has also released a signal that despite all the clamour in Germany, including within its ruling coalition … [and also] within the EU and the US to break away from their dependence on China or even decouple, that despite this, Chancellor Scholz, Germany’s business community and others still want to continue and strengthen their support for globalisation and continue to promote economic and trade cooperation with China.”
Cui Hongjian (崔洪建) – Director of the Department of European Studies at the China Institute of International Studies (CIIS)
“The fact that Scholz has decided to visit China despite internal and external pressures [not to] shows his political courage and political competence as well as his willingness to exert a positive influence on German domestic public opinion vis-à-vis China.”
“With Scholz's visit, I believe that more European leaders will be willing to come to China and cooperate with China.”
China-Russia: CASS researcher analyses China-Russia cooperation | Former PLA colonel calls on Beijing to prevent Russia from using nuclear weapons.
Finally, two articles on Sino-Russian relations. The first is from Zhou Bo (周波), a former senior colonel in the People’s Liberation Army and now senior fellow at the Center for International Security and Strategy at Tsinghua University. His opinion piece calling on his government to do more to prevent Russia from engaging in nuclear warfare is noteworthy in that it was published both in English in the Financial Times and in Mandarin on the popular Chinese news website Guancha.cn. The second article is by Li Shuangshuang (李双双), an associate researcher at the prestigious Chinese Academy of Social Sciences (CASS), who provides a more nuanced assessment of Sino-Russian relations than the typical propagandist pro-Russia rhetoric often encountered in China.
Zhou Bo:
"So far Beijing has trodden a careful line between Russia, its strategic partner, and Ukraine ... But if Moscow decides to use tactical nuclear weapons against Ukraine, China can hardly maintain such a position any more."
"China has so far refrained from providing any military assistance to Russia. But given Beijing’s huge influence on Moscow, it is uniquely positioned to do more to prevent a nuclear conflict."
"Beijing should tell Moscow to honour the five nuclear powers’ joint statement in January that 'nuclear war cannot be won and must never be fought'."
"Beijing should make clear to the Kremlin that using nuclear weapons on the battlefield would put China in a very difficult situation."
"The last thing Beijing wants now is a sour relationship with European capitals. At a time when the US is ramping up its competition with China"
"Finally, Beijing could play a significant role in brokering a deal between Russia and Nato."
"If Putin now opens a nuclear Pandora’s box that was kept closed even during the cold war, it would be a moment of infinite stupidity. China can help the world by simply telling Putin: don’t use nuclear weapons, Mr President."
Li Shuangshuang:
“The deterioration in US-China relations has reinforced Russia and China’s intent to cooperate with one another.”
“China-Russia relations are hardly a simple bilateral relationship, but are inextricably linked to the evolution of US-Russia and US-China relations. China-Russia relations are both the result and reflection of the recalibration of relations and power balances between the major powers.”
“Once economic relations between China and the US or between Russia and Europe take a temporary turn for the better, the importance and urgency of economic cooperation between China and Russia will be reduced and the incentive to cooperate will be weakened.”
“For security reasons, China has long been interested in strengthening its energy cooperation with Russia in order to [further] diversify its energy sources and reduce risk. However, for a long time Sino-Russian cooperation did not progress very smoothly due to Russian concerns and to resistance by Russian interest groups”
“With the deterioration of bilateral relations between Australia and China and the risk of maritime routes in the Middle East being cut-off which would affect [Chinas’s] energy imports, China needs to strengthen its energy cooperation with Russia.”
“China is [now] set to become more dependent on Russia for its energy imports.”
“For China, increasing grain imports from Russia will [also] help to improve food security and diversify grain imports, while for Russia it will help to offset some of the adverse effects of trade sanctions on [its] grain exports.”
“China can hardly obtain advanced technological support from Europe and the US anymore. This has led China to pay much more attention to … the strengthening of technological cooperation with Russia, especially in the aerospace and military fields.”
“Russia was initially reluctant to participate in BRI-related cooperation due to concerns over China's increasing investments and influence in Central Asia … [However,] under pressure from Western sanctions, Russia is [now] displaying an increased willingness to cooperate with China and take part in the promotion of BRI infrastructure projects.”
“Although China and Russia have stated that, ‘Friendship between the two states has no limits’ and that ‘there are no 'forbidden' areas for cooperation’, this does not mean that cooperation between the two countries will go [completely] smoothly … The future of Sino-Russian economic cooperation will face some inevitable twists and turns.”
“There is a mismatch between Russia's economic and military power. Russia's military power is strong, but its economy is relatively small. Putin wants to restore Russia's position as a world-class power. In cooperating with an economic giant such as China and given the historically complex relationship between China and the Soviet Union, Russia is bound to have some reservations.”
“[However,] as the world landscape undergoes major restructuring and as the US and Europe have labelled China and Russia as ‘revisionist’ countries and have joined forces with their allies to intensify their pressure [on Beijing and Moscow], China and Russia will undoubtedly strengthen their mutual cooperation and reliance on each other.”
“Finally, China faces a trade-off between strengthening its economic ties with Russia and preserving its international economic partnerships.”
“The US remains China's most important economic partner and, given the far-reaching nature of US foreign sanctions, Chinese companies are reluctant to trigger them, thus limiting [Chinese] investment in Russia.”
“The US and Europe have repeatedly pressured China to issue sanctions against Russia and threatened to impose sanctions on China. In some multilateral settings it is not only the US and Europe that are targeting Russia; smaller countries are also being forced to choose sides, creating a many-versus-one situation. For China, the trade-off between maintaining a ‘comprehensive strategic partnership of coordination for a new era’ with Russia and preserving multilateral cooperation with other countries is bound to increase in difficulty.”