April 1, 2022-Stealth War 82: China’s “Unprecedented” Capital Outflows; Beijing Restricts Visas for American Officials; Near-collision between Filipino and Chinese Coast Guard Vessels Near Scarborough Shoal; UK Pulls Two Judges from Hong Kong; China and Cambodia Sign Military Deal

* China’s “Unprecedented” Capital Outflows

* Beijing Restricts Visas for American Officials in Latest Round of Tit-for-Tat Measures

* Near-collision between Filipino and Chinese Coast Guard Vessels Near Scarborough Shoal

* UK Pulls Two Judges from Hong Kong

* China and Cambodia Sign Military Deal

Investors are also concerned about longstanding, existing issues, such as increased restrictions on foreign firms in China and on Chinese firms abroad, both by Beijing and other nations. These concerns have dovetailed with anxiety about how COVID-19 is impacting China, particularly the major economic costs of the government’s “zero-Covid” policy, which has contributed to supply chain failures and food shortages impacting internal stability and productivity. Nonetheless, analysts within and outside of China alike seem relatively sanguine, arguing that Xi recognizes that supporting Russia is costly and that investors will realize that China will remain a stable growth environment, even relative to more advanced nations. It remains to be seen, however, if China will in fact walk back some of its aggressive moves that have scared off investors, following through on recent claims that it will implement “a market-oriented, law-based and normal risk disposal mechanism.”

Beijing Restricts Visas for American Officials in Latest Round of Tit-for-Tat Measures

Yesterday, China announced that it will impose visa restrictions on U.S. officials following Washington’s decision to enforce similar visa curbs on Chinese officials for human rights violations in Xinjiang last week. At a press briefing in Beijing, Foreign Ministry spokesperson Wang Wenbin said, “the U.S. side fabricated malicious lies on human rights issues and used them as an excuse to interfere in China’s internal affairs, tarnish China’s reputation and oppress Chinese officials.” He added that these retaliatory sanctions were against American officials “who concocted lies about China’s human rights issues” and were meant to “defend China’s sovereignty, security, and development interests.” On March 21, Secretary of State Antony Blinken announced U.S. sanctions against Chinese officials involved in “repressive acts” against ethnic and religious minorities in Xinjiang, as well as “dissidents, human rights defenders, journalists, labor organizers, civil society organizers, and peaceful protestors in China and beyond.” The next day, Wang claimed the U.S. decision was “full of ideological bias and political lies, maligns and smears China and wantonly imposes restrictions on Chinese officials.” He went on to praise China’s human rights conditions, claiming they “have never been better,” and then criticize the past human rights violations in the U.S. and its “botched response” to COVID-19. A Chinese research fellow told Chinese state media that Beijing’s decisions “shows China’s determination in safeguarding its interests and legitimate rights.” These are the latest round in the tit-for-tat sanctions over the last few years, with China imposing retaliatory sanctions against four members of the U.S. Commission on International Religious Freedom after Washington banned imports from Xinjiang in December.

Near-collision between Filipino and Chinese Coast Guard Vessels Near Scarborough Shoal

Last month, the Philippines reported an instance of “close distance maneuvering” by a Chinese Coast Guard vessel in the South China Sea. According to the Philippine Coast Guard, the actions of the Chinese vessel constrained its movement, and violated the 1972 International Regulations for Preventing Collisions at Sea (COLREGS) treaty. The incident took place on March 2 during a maritime patrol around the Scarborough Shoal when the Chinese Coast Guard conducted close distance maneuvering over an area of around 21 yards, in the direction of the Philippine ship BRP Malabrigo. The incident comes at a tenuous time for the Philippines’ domestic and foreign policy. Presidential elections to succeed incumbent Rodrigo Duterte are currently underway, with analysts predicting a victory for Ferdinand Marcos Jr, the China-friendly son of late Philippine dictator Ferdinand Marcos. If victorious, the Philippines could abandon its shift towards a tougher posture toward China of late, which has included including buying the BrahMos shore-based supersonic anti-ship missile system from India and stepped up military exercises with the U.S.

The near collision coincides with the largest joint military exercise in years between the U.S. and Philippines, which focused on a potential conflict in the SCS. The joint military drills included 3,800 Filipino and 5,100 US military personnel, making it the largest since 2015. With an eye on China, the Philippines will also enter 2 + 2 talks with Japan and India in early April to shore up maritime security in the wake of increased Chinese aggression and potential for conflict. The parties will discuss arms exports to the Philippines as well, according to sources.

Concerns about China’s imposition of increasingly draconian “security” laws on Hong Kong have caused two senior judges from the UK to resign from the special administrative region’s highest court, the Hong Kong Court of Final Appeal (CFA). As UK Foreign Secretary Liz Truss stated, “the situation has reached a tipping point where it is no longer tenable for British judges to sit on Hong Kong’s leading court, and would risk legitimizing oppression.” Chinese officials and commentators however have been highly critical of this move, rejecting all accusations of abuse, and claiming that the resignations were a malicious political stunt, that the judges were forsaking their duty, and that the resignations were in fact to be celebrated as “a landmark event for Hong Kong’s judicial independence and for it to get rid of some colonial imprint.” Meanwhile, the court’s composition still includes five or six judges from the UK and three from Australia, with none appearing to indicate that they will follow suit in stepping down.

The CFA was maintained as part of the agreement between London and Beijing when Hong Kong was retroceded to China in 1997. Its mission is to protect the city’s contextually unique social contract via an independent and fair judiciary, a role the two judges felt they could no longer perform due to Hong Kong’s new security laws, which effectively outlaw dissent and severely curb free expression. While the court has effectively been called “window dressing” for the totalitarian regime’s international image, and it has not ruled on national security cases thus far, it is still considered a bellwether for investors and financial analysts concerned about Hong Kong’s status as an international business hub. If the CFA is terminated or seems compromised, then Hong Kong’s status as a global financial center may end.

The Chinese and Cambodian Militaries signed a memorandum of understanding (MOU) for deeper cooperation and security ties this week. While details of the agreement remain private, Chinese Defense Ministry spokesperson Senior Colonel Wu Qian confirmed the deal, stating the strong bilateral relations between the two countries. “China and Cambodia are close neighbors and iron-clad friends,” he said at a press briefing. Commander of the People’s Liberation Army Ground Forces General Liu Zhenli and Deputy Commander-in-Chief of the Royal Cambodian Army General Hun Manet officially signed the agreement on March 31. Hun Manet is the eldest son of Cambodian Prime Minister Hun Sen, who recently reconfirmed his candidacy for the upcoming general election in 2023, and designated his son as the party’s reserve candidate. The Cambodian People’s Party, the country’s long-time ruling party, endorsed Hun Manet as “future prime minister” in December.

The MOU comes amid deepening military-to-military relations between China and Cambodia in recent years, as China increases its maritime militarization and seeks control of the regional security architecture. The two countries have increased ties through frequent high-level exchanges, personnel training, anti-epidemic cooperation, and joint exercises training. One reason for such cooperation is the common competition with the United States. Last year, the U.S. imposed an arms embargo and sanctions on Cambodia due to its reported military ties with China—that China has signed a secret agreement giving Chinese troops exclusive use for Cambodia’s Ream Naval Base on the Gulf of Thailand—and the increasingly authoritarian government’s political and human rights violations. Cambodian media criticized the moves as unfairly singling out Cambodia and believed it was a “symbolic” gesture to oppose the growing China-Cambodia relations. Following the U.S. arms embargo, PM Hun Sen directed the Cambodian armed forces to destroy and purge all U.S.-supplied weapons and military hardware.