Pot-Pourri: Article Roundup (July 2023)

Tech Decoupling | De-Risking | Foreign Relations Law | Russian Soft Power | Local Government Debt

Today's edition is a pot-pourri of articles that I found interesting

TECH AND NATIONAL SECURITY

1. Title: “Constructing a New Equilibrium: Overcoming the ‘Fallacy of Composition’ when Coordinating the Development and Security of [China’s] Strategic Industries”

• Author: Qu Yongyi (曲永义) – Deputy director and party committee secretary at the Institute of Industrial Economics, Chinese Academy of Social Sciences (CASS); Professor, University of Chinese Academy of Social Sciences (UCASS).

• Quote: “Self-sufficiency' [自给自足] has naturally become the guiding principle for the development of [China's] strategic industries … However, once China's IC industry [starts] moving towards frontier technologies such as 5nm and 3nm [chips], and its products approach high-end usage, import substitution across the whole of the industrial chain may result in the ‘fallacy of composition’ – i.e. import substitution is reasonable for each [individual] segment of the industrial [chain]. But if it is pursued in all parts of the industrial chain, it may impede the development of the industry. This is because, as the core technologies of high-precision products in strategic industries are extremely complex and cutting-edge, it is impossible for any country to dominate all, or even most, of the parts of the industrial and innovation chains … [We should] promote the formation of two major division-of-labour systems [两大分工体系] led respectively by the United States and China, with Eurasian countries maintaining a neutral stance [持中间立场] and taking part [in both]. Only in this way will the development of China's strategic industries be able to shift from a low-standard approach of ‘passive security + closed development’ to a high-standard one of ‘proactive security + leading development’.”

• Link: International Economic Review No. 4 (July 2023)

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US ‘DE-RISKING’

2. Title: “Fully Recognising the Essence of the US’s ‘De-risking Rhetoric’”

• Author: Dong Chunling (董春岭) – Associate researcher, China Institutes of Contemporary International Relations (CICIR)

• Quote: “Clearly, the misuse of the concept of 'national security', the expansion of the 'China threat' [theory], and the portrayal of China as a 'risk' are becoming the main tools used by the US to cover up its own hegemonic nature, to drive a wedge between China and numerous developing countries, and to pave the way for a 'new Cold War' against China. This 'de-risking' concept is particularly deceptive and incendiary [煽动性]. One of its dangers is that the United States is attempting to use this as a way both to reassure domestic and international opponents of 'decoupling' and to make the implementation of the US's containment strategy against China more refined, more covert and smoother.”

• Link: Global Times (19.07.2023)

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3. Title: “De-risking Actually Carries Greater Risks”

• Author: Ma Xue (马雪) – Associate Researcher, Institute of American Studies, China Institutes of Contemporary International Relations (CICIR)

• Quote: “As a matter of fact, the broader the definition given to risk, the closer the call for "de-risking" becomes to 'decoupling'. When 'risk' becomes generalised, policies being formulated are likely to move closer to 'decoupling'. Thus, while 'de-risking' may appear to be more rational than 'decoupling', it is actually expanding the meaning of 'risk' and aggravating the world's economic chaos.”

• Link: China-US Focus (27.07.2023)

EU ‘DE-RISKING’

4. A Commentary on the EU’s Economic Security Strategy:

• Author: Sun Yanhong (孙彦红) – Director of the European Economic Studies Office, Institute of European Studies (IES), Chinese Academy of Social Sciences (CASS)

• Quote: “It is worth noting that the EU's 'Economic Security Strategy' (ESS) does not mention China, but between the lines there is an obvious overtone of reducing its dependence on, and strengthening its competition with, China ... The implementation of its ESS will undoubtedly have an impact [冲击] on China-EU economic cooperation ... However, there is no fundamental clash of political interests between China and the EU. The two countries are highly complementary economically, sharing many common concerns in areas such as combating climate change, protecting biodiversity and upholding effective multilateralism ... In fact, according to a related study by the European Commission, the proportion of the EU's imports of commodities with a high degree of dependence on China accounts for less than 1 per cent of the EU's total imports from China. Indeed, the risk of so-called 'dependence on China' should not be overstated ... [Moreover,] the complexity and ambiguity of the distribution of powers both at the EU level and among member States threaten to undermine the implementation of the ESS.”

• Link: Shijie Zhishi (27.07.2023)

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CHINA’S FOREIGN RELATIONS LAW

5. Title: “Foreign Relations Law: Providing a Legal Basis for China's Exchanges with the World as it Moves Towards Becoming a Global Power”

• Author: Lin Minwang (林民旺) – Researcher at the Institute of International Studies, Fudan University

• Quote: “For a rising global power such as China, the importance of [conducting] diplomatic work [对外工作] will continue to grow. The enactment and implementation of the Foreign Relations Law will provide China with powerful guidance in its journey towards great power rejuvenation. Most notably, it will provide the international community with a foreign relations law that is neither from America nor from Europe … At present and in the years ahead, the various struggles that China faces will be long lasting, and will at the very least accompany us throughout the process of our striving to achieve [China’s] second centenary goals. In such an external environment, we must dare to struggle and be good at struggling, which includes making good use of the rule-of-law weapon [法治武器] while constantly enriching and improving our legal ‘toolbox’ for [such] international struggles.”

  • Note: Lin is quoting extensively from China’s top diplomat Wang Yi’s recent piece in the People’s Daily.

• Link: The Paper (03.07.2023)

CHINA-RUSSIA

6. Title: “Underestimated Soft Power: Examining Russian Conservatism and Its Global Influence”

• Authors: Meng Weizhan (孟维瞻), Lecturer at the Institute for Advanced Study in Social Sciences, Fudan University; and Ding Yuhang (丁宇航) – PhD Student, School of International Studies, Renmin University of China

• Quote: “From China's perspective, it should be noted that Russia will remain a powerful material and cultural force for a long time to come. Although the Russo-Ukrainian conflict has had some adverse effects on its international standing and image, the situation is not as serious as the Western media make it out to be. We should try to look at Russia's development path as objectively as possible. Too much attention to Western rhetoric and the logic of the American value [system] will lead us to misjudge Russia. The development of the Sino-Russian comprehensive strategic partnership is conducive to the maintenance of China's strategic security. China should manage its relations with Russia and with the West carefully. At the same time, we have to realise that Western societies are undergoing profound changes and that the mainstream political forces in Europe and the United States are on the decline. How the development of conservatism in Europe and the United States might affect China's interests is something we must continue to monitor.”

• Link: Pacific Journal No. 6 (June 2023)

LOCAL GOVERNMENT DEBT AND ECONOMIC GROWTH

7. China’s Local Government Debt Problems – Causes & Policy Recommendations:

• Author: Zhang Ming (张明) – Deputy Director of the Institute of Finance and Banking, Chinese Academy of Social Sciences (CASS)

• Quote: “Although the probability of an outbreak of a systemic debt crisis in China is currently very low, the possibility of an outbreak of local government debt defaults in some [of China’s] central and western regions, especially in third- and fourth-tier cities, cannot be ruled out.”

• Link: Comparative Studies (01.06.2023)

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8. On the State of China’s Economy, Local Government Debt and Boosting Economic Growth:

• Author: Yu Yongding (余永定) – Academician at the Chinese Academy of Social Sciences (CASS); Former director of CASS’s Institute of World Economics and Politics; Former president of the China Society of World Economics.

• Quote: “I would like to emphasise that the current state of China's [public] finances and its monetary policy space provide the government with the ability to address the issue of local government debt. That is why we need to hurry up and fix this, without [any further] delay. However, we should not wait until [our] local government debt problem has been resolved before [we begin] implementing an expansionary fiscal policy. Declining economic growth will only exacerbate the problem of local [government] debt. Regarding China's fiscal policy this year, it should be stressed that issuing more treasury bonds to support infrastructure investment is the key to stabilising China's economic growth. This is a clichéd view [老生常谈的观点] regarding China's economy and even Japan's, and one that may not be popular with Chinese scholars in general and younger ones in particular. But as I grow older, I increasingly believe that this is the best option. I should also clarify that I am not talking about infrastructure in a narrow sense – building railways, bridges and houses. [I am using it as] a relatively broad concept that includes public infrastructure in areas such as education and elderly care.”

• “Given that China's economic growth rate is still on a continuous downward trend, and that China is currently facing a severe unemployment [crisis], [our] fiscal stimulus should be increased further and, in light of the current economic situation, a higher fiscal deficit rate should be adopted rather than sticking stubbornly to the 3% threshold.”

• Link: China Finance 40 Forum (20.07.2023)