| Welcome to the Stealth War Newsletter, a collection of the top 5 recent news items, collected on The Jamestown Foundation’s website, stealth-war-org.cdn-pi.com. To continue to receive this weekly collection, click the button below to subscribe. |
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Stat Du Jour
This issue’s number to watch-4.9%
Last week’s decline in the CSI 300 (a stock market index that replicates the performance of the top 300 stocks on the Shanghai and Shenzhen Stock Exchanges); its biggest drop since February 2020. Although the index recovered somewhat this week, the impact of continuing mass lockdowns undertaken through the zero-COVID policy will continue to weigh heavily on Chinese equities.
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| This Week:
* Its Role has Changed, but China is Still Fueling America’s Fentanyl Epidemic
* Biden Administration Debates Keeping Trump Tariffs on Chinese Imports
* PRC Defense Chief Visits Oman as China’s Strategic Presence in Persian Gulf Expands
* Hong Kong’s Sole Candidate Reveals Plans for City
* Pakistan’s Foreign Minister Visits Chinese Embassy to Placate Beijing After Karachi Bombing |
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Its Role has Changed, but China is Still Fueling America’s Fentanyl Epidemic
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This week, U.S. Secretary of State Antony Blinken testified before the Senate Foreign Relations Committee (SFRC). Blinken’s interaction with the SFRC focused largely on the interrelated strategic challenges presented by Russia and China. However, the hearing did touch briefly on China’s role in a major public health and law enforcement challenge for the U.S., which is the continued flow of Fentanyl from the PRC to the Western Hemisphere.
The issue was raised by Republican Senator Bill Haggerty (TN) who observed that drug overdose is the primary cause death for Americans between ages 18 and 45, with 100,000 deaths last year, the vast majority of which were caused by fentanyl. He noted the major role of Chinese manufacturers in providing precursor chemicals to Mexican drug cartels for the fentanyl production. Haggerty also stated that “If President Xi and the Chinese Communist Party can shut down a city the size of Shanghai, one of the three largest cities in the world, I think they could certainly shut down the flow of fentanyl and its precursors into our hemisphere.” Blinken strongly agreed that this is a serious issue. He promised to pressure China to stop the flow of fentanyl and to coordinate closely with both Congress and the Mexican government on this issue.
Over the last several years, China’s role in fentanyl production and distribution has evolved. From 2014 to 2019, between 70-80% of the fentanyl seized by federal authorities en route to the U.S. originated directly from China. During those years, Chinese manufacturers relied on the internet to distribute the deadly drug in the U.S. Since then, production has shifted to Mexico, and Chinese manufacturers have adjusted to providing precursor chemicals to their Mexican clients. Per Senator Haggerty, Chinese entities have also provided support to drug cartels that are running illicit labs for fentanyl production in Mexico. |
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Biden Administration Debates Keeping Trump Tariffs on Chinese Imports
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The Biden administration is currently debating whether the U.S. should lower some of the tariffs that were imposed on Chinese goods by the Trump administration, according to Axios. The administration could provide “exclusions” for some Chinese goods, meaning they will not be subject to the wide-ranging tariffs currently in place. In 2019, the Trump administration imposed tariffs on $300 billion worth of Chinese imports after an investigation under Section 301 of the Trade Act of 1974 found that China engaged in unfair and illegal trade practices, and intellectual property theft. Biden has largely continued his predecessor’s competitive approach toward China, which includes keeping tariffs in place. However, rising inflation has caused economists to re-evaluate the economic impact of tariffs on consumer prices.
The debate comes after Deputy National Security Advisor Daleep Singh said lowering tariffs could help the U.S. combat rising inflation, which has been a key concern for the Biden administration. “It could be that in this moment of elevated inflation and China having its own very serious supply chain concerns…maybe there’s something we can do there,” he stated last Thursday. Singh also claimed that tariffs have not served a strategic purpose and China also had implemented non-strategic retaliatory tariffs against the U.S. The following day, U.S. Treasury Secretary Janet Yellen echoed Singh’s remarks, signaling she is open to lowering tariffs to address inflation. Lowering some of the tariffs on Chinese goods may help Biden alleviate the negative impacts of the trade war, however any such action will likely face strong pushback in both the National Security Council and Congress, where the focus remains on strategic competition with China. For example, Democratic Congressman Tim Ryan (OH) expressed staunch opposition to any tariff relief for China stating: “Lifting tariffs on so-called ‘non-strategic’ goods from China would be a major mistake, doing nothing to ease inflationary pressures on American consumers and rewarding a human-rights-abusing, communist government for years of cheating American workers and stealing jobs.”
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PRC Defense Chief Visits Oman as China’s Strategic Presence in Persian Gulf Expands
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| Yesterday, Chinese Defense Minister Wei Fenghe arrived in Muscat, Oman for a series of meetings with senior officials. During his visit, Wei stressed that “China and Oman have witnessed a continuous and in-depth development in their bilateral relations.” Notably, Wei’s visit to the Sultanate followed a stopover in Iran. In recent years, Oman has emerged as a key interlocutor between Iran and its regional enemies- Saudi Arabia, UAE and Israel.
China has been a key investor in Oman with Chinese firms engaged in about 6.6 billion worth of investment and construction projects since 2008. China has also invested significantly in Oman’s Duqm port, which is strategically located on the Southern coast of Oman, thereby allowing vessels to bypass the Straits of Hormuz chokepoint. Historically, Oman has also welcomed port calls by PLA Navy ships, which was particularly critical for China’s ability to supply its Gulf of Aden counterpiracy task force, especially before China established a small military base in Djibouti in 2016. From 2008-2015, PLA Navy ships visited Port Salalah over 20 times, which was more than any facility except Djibouti. As a result, at the time, Andrew Erickson and Gabriel Collins contended that “Port Salalah has achieved de facto facility status.”
Finally, Oman remains a key supplier of oil to China, which is the world’s largest energy importer. From 2005-2019, Oman was the fifth largest source of oil imports to China. In 2020, 11.3 billion of Oman’s 13.8 billion in total; exports to China consisted of crude petroleum. As a result, China runs a large trade deficit with the Arabian kingdom. |
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Hong Kong’s Sole Candidate Reveals Plans for City
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On Friday morning, John Lee Ka-chiu, Hong Kong’s sole candidate to become the city’s next Chief Executive, released his manifesto, offering insight into his policy platform for the next five years. The manifesto, the English version of which is 44 pages long, comes three weeks after the 64-year-old former policeman and security chief announced his election bid. Lee promised to implement a “results-oriented” approach to leadership, increase the city’s competitiveness, and consolidate its strengths. His agenda includes four broad areas: strengthening governance capability, streamlining processes to provide better housing and living options, enhancing overall competitiveness and development, and building an inclusive society that offers upward mobility for young people. Importantly, Lee said his administration would seek to legislate Hong Kong’s own security law in accordance with Article 23 of the Basic Law, which requires Hong Kong to enact its own laws to prohibit acts of treason, secession, sedition, or subversion against the central government. The Hong Kong government first attempted to legislate Article 23 in 2003, but failed due to mass protests. In January, incumbent leader Carrie Lam announced plans to draft new “local legislation” that met the requirements of Article 23 and many view Lee’s efforts to follow through with Lam’s objectives. The announcement came after Beijing imposed its own national security law in June 2020 and the subsequent crackdown of independent media outlets throughout Hong Kong. With the support of Beijing and no opposition, Lee is guaranteed to be elected Chief Executive on May 8.
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Pakistan’s Foreign Minister Visits Chinese Embassy to Placate Beijing After Karachi Bombing
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On April 26, 2022, a female suicide bomber from the Baloch Liberation Army (BLA) killed three Chinese citizens and their Pakistani driver as they were entering Karachi University’s Confucius Institute. According to surveillance footage, a shuttle car carrying the group exploded and burst into flames suddenly, and without warning outside the institute, leaving one survivor. The incident comes less than a year after the Dasu terror attack, in which Tehreek-e-Taliban, the Pakistani branch of the Taliban, killed nine Chinese citizens on their way to the Dasu Hydropower project. Following the bombing, the Chinese Embassy expressed outrage and condemned the attack. China also launched an emergency response team and urged Pakistan to take effective measures to ensure such an incident never happens again.
On Wednesday, Pakistan’s new Foreign Minister Bilawal Bhutto-Zardari visited the Chinese Embassy in Islamabad to mourn the victims and placate the Chinese government. Bhutto had been sworn in earlier that day, but felt it was an immediate priority to address the rift that had suddenly frayed a previously “all-weather” friendship between the two nation states. He expressed his condolences and vowed for a thorough investigation of the attack, noting that the Pakistani cabinet will be enhancing security for Chinese citizens, projects, and institutions across the country. Whether this will be successful, however, is subject to debate, as the $54 billion China Pakistan Economic Corridor (CPEC) is coming under increasing threat not only from Baluch insurgents, but also from the Tehreek-e-Taliban and other extremist groups. |
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