August 27, 2021- Stealth War 53: Beijing’s Lawfare in Hong Kong; PLA drills in Tibet; Vaccine Diplomacy; Chinese IPOs; US schools in China

(sources: SCMP; SCMP)

This past week, Vice President Kamala Harris toured Southeast Asia as part of an effort by the Biden administration to counter Chinese influence in the region. Harris repeatedly criticized China during the trip, and stated that the United States would support Vietnam in its maritime border dispute with China in the South China Sea. However, China is actively working to increase its influence in Vietnam. When Harris’ flight to Hanoi was delayed for three hours, the Chinese ambassador to Vietnam had a surprise, unannounced meeting with the Vietnamese Prime Minister, Phanm Minh Chinh. During the meeting, the Chinese ambassador declared that Beijing would send two million vaccine doses to China. Following the meeting, Chinh stated that Vietnam does not take sides in its foreign policy.

The surprise meeting taking advantage of Harris’ delayed flight is the latest example of China’s vaccine diplomacy, itself part of the Belt and Road Initiative-linked Health Silk Road effort to foster greater global public health cooperation that has been revived in the wake of the pandemic. Providing Vietnam with two million vaccines is a success for China’s embattled vaccine program, which has recently been criticized by officials in Southeast Asia. Six months ago, as China began rolling out its vaccine, it promised to provide 255 million doses to the region. Since then, Southeast Asian government officials have raised doubts about the quality of Chinese vaccines as new outbreaks emerged in their countries. Some have complained about the conditions inherent in Chinese vaccine donations, providing room for the United States to provide “no strings attached” vaccines. The US has provided 23 million shots to the region thus far, and Harris reportedly offered vaccine assistance to Vietnamese officials. Though beating Vice President Harris to donate vaccines was a diplomatic win for Beijing, China still has major problems in its vaccine diplomacy in the region. In Vietnam, there is distrust from many corners on the “safety and effectiveness” of Chinese vaccines.

Chinese IPOs Affected in U.S., China, as Wall Street Stays Bullish on Chinese Markets

After the China Securities Regulatory Commission opened a probe into an investment bank and several other firms, 42 initial public offerings (IPOs) were put on hold in Shanghai and Shenzhen. The regulatory move is part of a broader crackdown on the private sector in China and the IPOs affected by the most recent moves include BYD Company’s chip production.

Overseas, the U.S. Securities and Exchange Commission (SEC) has unveiled a new slate of rules expanding disclosure requirements for variable interest entities (VIEs), a common vehicle for Chinese companies to list overseas. In addition, Chinese firms must also disclose investor implications and Chinese state interference in the company. The rules come after the SEC paused the IPOs of Chinese companies seeking to list in the U.S. in July. In 2020, Chinese IPOs in the U.S. stock market were valued at $12.8 billion. Concerns about the risks of doing business with China have been growing across all business sectors. Due to increasing concerns about corporate espionage, it was recently revealed that the FBI has been conducting industry briefings under the Delta Protocol, an operation to warn American startups—especially in the technology sector—of potential espionage risks from state actors such as Russia and China. In recent years, more high-profile instances of information theft have arisen. A list by the Center of Strategic and International Studies details 100 instances of intellectual theft since 2000.

Despite growing awareness over such economic security concerns, Wall Street investors in the US-China Financial Roundtable have recently re-opened Track 1.5 talks with Chinese officials. The group, formed in 2018, paused discussions due to the COVID-19 pandemic, but have continued to lobby for stronger ties with China even as the consensus on strategic competition grows. Members of the roundtable include Blackstone, Goldman Sachs, and Morgan Stanley, financial heavyweights with a vested interest in China’s $54 trillion financial services market. While Washington officials grow suspicious of engaging in business with China, Wall Street investors remain enthusiastic about expanding into the market.

Education Sector Crackdowns and Growing Concerns About Academic Freedom of U.S. Schools in China

Ahead of the start of the fall semester, the U.S. State Department has largely resumed granting visas to Chinese students studying in America at pre-pandemic levels. Based on the continuing high numbers of student visa applicants, the U.S. remains an attractive destination for Chinese students, even as the greater bilateral relationship has rapidly cooled. Student exchanges, as a significant part of broader people-to-people exchanges, have long served as a positive and stabilizing factor in U.S.-China relations, but in recent years their risks and benefits have been called into question.

A new report by the industry publication Inside Higher Ed has noted that the education joint venture New York University (NYU) Shanghai is arguing in an ongoing employee discrimination lawsuit that it is not controlled by the American NYU and therefore not liable under U.S. employment law, despite NYU’s leadership previously testifying to the U.S. Congress in 2015 that the U.S. university had “absolute control” over all of the Shanghai campus’ operations. Apparently contradicting these claims, NYU Shanghai has said that Chinese foreign laws and policies “state that foreign investment in the higher education sector is limited to Sino-foreign jointly run schools and programs…over which the Chinese party must have control.” The lack of foreign oversight over American-branded schools—long known for their norms of academic freedom and nondiscrimination—is particularly concerning in light of recent Chinese education sector crackdowns.