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December 4, 2020 – Stealth War Newsletter 18

By: Jamestown Foundation

Fri December, 2020, Age: 3 years



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We hope you enjoyed your Thanksgiving. To make up for the lack of an issue during the holiday, Stealth War is providing a double issue of the Stealth War Newsletter.

Special Double Issue
December 4, 2020

Strategic Indicator
This issue’s number to watch

15 years

The estimated timeframe in which China will gain the capacity to fight extended foreign wars, according to a the U.S.-China Economic and Security Review Commission’s latest annual report to Congress, published this week.

The U.S.-China Economic and Security Review Commission’s annual report says that the Chinese Communist Party (CCP) “regards the liberal democratic values championed by the United States as a fundamental impediment to its external ambitions and an existential threat to its domestic rule,” highlighting the increased tensions in the U.S.-China relationship, which has continued to dramatically worsen this past year. In general, the panel called for a more aggressive response to Beijing’s growing assertiveness. Specifically, USCC recommended that Congress put “reciprocity” at the heart of the U.S.-China relationship, and ensure fair access to markets and information as well as equal treatment of journalists, diplomats and NGOs. The report also focused on what USCC vice chairman Carolyn Bartholomew called “a growing awareness and concern about the role that American companies and investment vehicles are playing, or might be playing, in increasing China’s militarization and the direct threat that poses to the United States.”

To that end, the commission called for the increased scrutiny of Chinese investments in the U.S. by the Federal Trade Commission; establishing a “Manhattan Project”-like effort to bolster U.S. self-sufficiency in the medical industry; bolster industrial policy to better support U.S. technology firms and support American priorities in international standard setting; and directed the State Department to increase its scrutiny of China’s efforts to “subvert the principles and purposes” of international organizations such as the United Nations and the WHO. It also recommended streamlining barriers to asylum for Hong Kong residents fearing persecution from mainland China and enhancing U.S.-Taiwan relations by making the U.S.’s unofficial representative to the Republic of China a presidential nominee subject to Senate advise and consent—effectively making the position closer to an official ambassadorship.

USCC conclusions and recommendations appeared to largely vindicate the Trump administration’s aggressive China policy over past few years, which Axios reported would be a particular priority for the outgoing administration attempting to cement its impact on U.S.- China relations. In addition to continuing investigations related to the DOJ’s “China Initiative” to investigate trade secret theft and economic espionage conducted on behalf of the Chinese government, President Trump also recently signed an executive order preventing American companies from investing in 31 Chinese companies that are owned or controlled by the Chinese military. This week, the Department of Defense added four more companies—chipmaker Semiconductor Manufacturing International Corp (SMIC), oil giant China National Offshore Oil Corp (CNOOC), China Construction Technology Co, and China International Engineering Consulting Corp.—to this blacklist.

A recent New York Times investigation clearly lays out the strong ties that remain between China and Wall Street, even as U.S.-China relations more broadly have grown increasingly acrimonious. China is the world’s fastest-growing market for financial services, at a time when margins around the rest of the world are being squeezed by an ongoing pandemic. Although many other American companies grown disenchanted with their efforts to engage with China, China has made prominent concessions in connection with the Phase One trade deal to open up its financial markets—and Wall Street giants are bullish about the gains to be made in China. Just this year, JPMorgan gained approval for its minority stake in a futures venture, while Goldman Sachs and Morgan Stanley became controlling owners of their subsidiary security ventures in China. Citigroup gained approval for a custodian license to act as a safe keeper for securities held by funds operating in the country. And BlackRock became the first foreign firm to gain preliminary approval for a wholly owned mutual-fund business in China, giving the American company access to a vast market of individual consumer investors that until now has been largely untapped by foreign financial firms.

Regardless of these developments, China’s financial markets remain highly regulated and under tight state control. Senior Biden advisers have also made clear that they are unwilling to prioritize financial firms’ access to the Chinese market in future trade talks; former Treasury Secretary Larry Summers recently published a policy paper advising the incoming administration “to be clear at the outset that you will not spend your scarce political capital or U.S. political capital on the commercial agenda of U.S. financial firms operating abroad where their success has almost no nexus with U.S. job creation.”

Over the past year, China has moved aggressively against many of its neighbors to shore up a variety of sovereignty claims in regions ranging from the South China Sea to the Himalayas. Images provided by the U.S.-based satellite operator Maxar Technologies appear to show “significant construction activity” along the contested China-Bhutan border, including a new village and supply depot near the Doklam area, which was the site of a tense dispute between Indian and Chinese forces in 2017. The construction was denied by Bhutanese and Chinese officials, with Bhutan’s ambassador to India Major General Vetsop Namgyel saying, “there is no Chinese village inside Bhutan.” A representative from China’s Ministry of Foreign Affairs said that, “China’s normal construction activities on its own territory are entirely within the scope of China’s sovereignty, and there is nothing wrong with it.” China this summer also added a new claim to nearly 300 square miles of contested territory in the Sakteng Wildlife Sanctuary, which is just over the border close to where the new village of Pangda was built. With the new construction, China appears to be brushing off decades of quiet and fruitless talks to finalize the border in favor of “unilaterally changing facts on the ground.” A 25th round of talks was scheduled for this year but postponed due to the coronavirus.

China has used similar tactics to assert its territorial claims by building up artificial islands and fortified shoals in the South China Sea, and also along its contested border with India in the Himalayas. And China’s unilateral territorial grabs are difficult to reverse short of the use of force, as the Indian government has learned this year. Since a border dispute turned violent this past June, Chinese troops have reinforced their positions around eastern Ladakh in areas that India once controlled.

Chinese state media appear to be doubling down on reports that the coronavirus can be spread through international cold chain supplies. Frozen food imports are not considered a significant vector of infection by foreign experts studying the coronavirus, and countries such as New Zealand and Australia have found little evidence to support these claims. But the reports lend credence to a growing theory, pushed hard by Chinese propagandists, that the virus originated elsewhere. The official newspaper People’s Daily claimed in a Facebook post last week that “all available evidence suggests that the coronavirus did not start in central China’s Wuhan,” and the country appears to be stepping up a campaign to question the origins of the global Covid-19 pandemic. Chinese scientists have even submitted a paper for publication to the Lancet – although it has not yet been peer-reviewed – that claims “Wuhan is not the place where human-to-human Sars-CoV-2 transmission first happened”, suggesting instead that the first case may have been in the “Indian subcontinent”. The foreign ministry spokesperson Zhao Lijian emphasized to reporters that it was important to distinguish between where Covid-19 was first detected and where it crossed the species barrier to infect humans.

This point may seem largely moot to those who are not epidemiologists, but it has become an increasingly important element of China’s efforts to control the international narrative surrounding the pandemic, portraying its handling of Covid-19 as a triumphant success and a validation of the Communist Chinese Party’s authoritarian governance model. The Chinese government implemented research restrictions on scientists studying the novel coronavirus as early as April, and the new drive to question the virus’ origins—while also continuing to stymie independent international investigations into the virus’s origins—shows the CCP’s disturbing willingness to subvert and politicize the fundamentals of scientific research in its pursuit of “telling China’s story well” and prevent criticisms of the Chinese state.

Following the Hong Kong political leadership’s surprise ousting of four pro-democratic members of Hong Kong’s Legislative Council (and the remaining fifteen members of LegCo’s pro-democratic bloc resigning in solidarity), China appears to have succeeded in silencing official dissenting voices within Hong Kong’s legislative branch. This marks a triumph for the government’s continuing efforts to erode the freedoms enshrined in Hong Kong’s Basic Law mini-constitution which have been under increasing attack following the passing of a wide-ranging and oppressive national security law this past June.

Amid similar efforts to undermine Hong Kong’s independent judiciary, silence the autonomous region’s indigenous press, and crackdown on teachers and professors who refuse to abide by new regulations mandating “patriotic education,” one former journalist who spent his career working in Hong Kong has opined that the separation of powers which underlay the “One Country Two Systems” framework has been effectively shattered, “sentence[ing] the administrative region to a Communist death.” The writer Chang Che traces the intellectual underpinings of China’s increasingly restrictive Hong Kong policy directly back to the Nazi jurist Carl Schmitt, arguing that Schmitt’s theories about state and constitutional norms have found a welcoming home in the “statist” movement among Chinese intellectual thinkers, who support Xi Jinping’s reinvention and revitalization of state capacity as part of an increasingly authoritarian government. According to Chang, “Schmitt gives pro-Beijing scholars an opportunity to anchor the party’s legitimacy on more primal forces—nationalism and external enemies—rather than the timework notion of class struggle.”

Regardless of its ideological underpinnings, China’s crackdown on Hong Kong yielded more bad news this week. Three young activists and leaders of the pro-democracy movement were sentenced to between seven and 13½ months in prison for their role in organizing and participating in unauthorized protests last year. Joshua Wong, Agnes Chow and Ivan Lam all pled guilty to leading, inciting, and participating in a protest of Hong Kong police headquarters last year. Hong Kong’s Basic Law states that residents have freedoms, including the right to demonstrate. At the time of sentencing, the judge noted that protestors at the rally in question had blocked roads but were not violent. Legal observers have worried that these sentences could be the first of a series of charges which will extend their time in jail indeterminately. “It is now the Chinese Communist Party’s plan, I think, to start an indefinite detention for them, by giving them new charges again and again,” said Eddie Chu, a former pro-democracy lawmaker who has campaigned with Wong and who is also facing criminal charges. “For them, the treatment will be much more politically motivated,” he added.

Stealth War Flyover


In the third episode of Stealth War Flyover, Jamestown President Glen Howard and former Senior Director for Strategy to the President Robert Spalding discuss China’s threat to arrest U.S. citizens in China in reciprocity for recent arrests of PLA-affiliated people in the United States; the State Department mulling a ban on American businesses working with the Chinese fintech firm, the Ant Group; what the trial release in Shenzhen of a new Chinese digital currency mean for American interests; Peter Navarro’s recent comments at the Hudson Institute; and Hillary Clinton’s recent article in Foreign Affairs on China and US national security strategy.

Stealth War Flyover is a periodic series featuring Brigadier General (ret.) Robert Spalding and Jamestown Foundation President Glen Howard discussing and dissecting the latest news in the ongoing competition between China and the United States.

Watch Here

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