September 10, 2021 – Stealth War 54: National Security and Decoupling; Biden and Xi; ASEAN Advances; Extending Aid to Afghanistan; China Passes COVID-19 Vaccine Landmark;

* National Security and Decoupling Concerns Continue to Plague Chinese Tech Firms 

* Biden and Xi Hold “Extensive Strategic Communication” Amid Tensions in South China Sea

* BRI Roundup – ASEAN Advances and Tonga as a Warning in the South Pacific

* Extending Aid to Afghanistan While Boosting Border Security

* China Passes COVID-19 Vaccine Landmark, Seeks to Counter “Lab Leak” Theory

Foreign national security concerns—in combination with a wide-ranging business and cultural rectification campaign at home—have made the future growth and development of many of China’s technology companies uncertain. In an early September interview, one Huawei board member insisted that the Chinese telecommunications firm had the ability to survive U.S. restrictions, which have effectively cut off its supply to the advanced chips necessary for smartphones and other high-tech consumer devices. Huawei faces an uphill battle. Its revenues have fallen year-on-year by 38 percent and it faces an imminent ban from British 5G networks later this month. In some rare good news for the beleaguered company, in late August the Biden administration approved some auto chip sales to Huawei, although an August 2020 rule banning licenses for more sophisticated products with 5G technology remains in place.

Huawei has been criticized especially by the U.S. as an exemplar of concerns about the risks that Chinese companies pose to economic and national security. One other example that recently came to light is the case of Arm China, a Chinese subsidiary of one of the world’s most important semiconductor IP firms. An industry analyst recently argued that, amid ongoing legal disputes with its parent company, Arm China has in effect “gone completely rogue, operating as an independent company with in-house IP/R&D.” The story underscores the risks and uncertainties for foreign firms seeking to do business in China.

Heightened tensions about national competition have also impacted the semiconductor industry in particular, with companies announcing plans for massive investments to secure their manufacturing and supply chain capabilities. On September 3, China’s largest semiconductor SMIC announced that it would plan to build a new $8.87 billion 300 mm GigaFab in the Lingang Free Trade Zone near Shanghai. Although the plant will not produce chips at the most advanced level (no Chinese company has the technical capacity to do so), it should go some way to addressing high domestic demand for larger chips such as those used in the automotive industry. The news comes after SMIC previously announced new manufacturing constructions in Shenzhen and Beijing as well.

U.S. President Joe Biden spoke with his counterpart Xi Jinping on Thursday evening (U.S. time), marking the first time that the two had spoken in seven months. According to Bill Bishop, a China expert who was on the background briefing, the call was initiated by the U.S. with the hope that “having a broad and strategic conversation…could change behaviors and help maintain guardrails on the relationship to avoid things veering into conflict.” According to a Chinese readout of the conversation, Xi reportedly said that “on the basis of respecting each other’s core concerns and properly managing differences, the relevant departments of the two countries may continue their engagement and dialogue…” The Chinese readout also reported that Biden had promised that the U.S. “has no intention to change the one-China policy.” Although the talks were more neutral (and thus more hopeful) than other recent bilateral engagements, they yielded no specific announcements, and a White House readout of the conversation was short and vague, although it did emphasize that “the two leaders discussed the responsibility of both nations to ensure competition does not veer into conflict.”

The call came as tensions have risen in the South China Sea, a region where the U.S. and China have frequently clashed. This week, the USS Benfold sailed within 12 miles of Mischief Reef in the Spratly Islands, a contested territory where the Chinese have built military facilities, flouting a new Chinese maritime identification identification law that was imposed just days earlier. While the US Navy 7th Fleet defended the operation as part of regular freedom of navigation operations (FONOPs), a spokesperson for China’s Southern Theater Command said that the activity had “seriously violated China’s sovereignty and security,” reporting that Chinese fighter jets had been deployed to drive the offending ship away.

China has ramped up the scale of its naval exercises involving elements of island capture, reflecting the Chinese navy’s increased posturing as the U.S. has similarly shown a growing willingness to challenge Beijing in the SCS and other regional powers have increasingly expressed their concerns over China’s ambitions. A Chinese scientific research ship, the Shiyan 6, departed port on Monday to explore parts of the south China sea, sparking concerns for its five regional neighbors that also claim contested territories in the region. Said one Vietnamese scholar, “it’s like a theater for those survey ships to do research and to harass the exploration in the region.” During a visit to Washington, the Philippine Defense Secretary promised that Manila would also ignore China’s amended maritime traffic law as he also lobbied for increased arms sales and upgraded defense ties between the U.S. and the Philippines.

The Chinese Foreign Minister Wang Yi has announced that the country will provide $31 million in emergency humanitarian aid to Afghanistan, along with 3 million doses of COVID-19 vaccines. The promise is part of an effort by China and Afghanistan’s other neighbors to stabilize and alleviate chaos in the country, which was recently taken over by the Taliban. While China has not officially recognized the new government, it appears to be making plans to strengthen regional security coordination even as it extends a hand to Afghanistan. This week, Wang met with his counterparts from Pakistan, Iran, Tajikistan, Uzbekistan, and Turkmenistan to discuss the crisis in Afghanistan, where the leaders agreed that Afghanistan’s neighbors should work together to fill the hole of humanitarian responsibility left by the United States. The joint effort would include COVID-19 prevention, the maintenance of border ports, refugee management, and counterterrorism efforts.

China’s growing presence and influence in the region has US officials worried. An anonymous source told American news outlets this week that China was in talks with the Taliban about deploying its own military forces to Bagram airfield, a site formerly occupied by the U.S. military for over 20 years.  The Chinese foreign ministry quickly denied this rumor, calling it “a piece of purely false information.”

China’s National Health Commission announced on Monday that the country had fully vaccinated 969 million and administered over 2 billion COVID-19 vaccine doses. The public health success comes as the country continues to receive scrutiny over the origin of the coronavirus. The Intercept released over 900 pages of documents obtained through a Freedom of Information Act suit, revealing U.S.-based health group EcoHealth Alliance’s investments of federal money to fund coronavirus research among bats at Wuhan University for Animal Experiment, as well as research to find novel coronaviruses with the capability to infect humans. The nearby Wuhan Institute of Virology has received greater worldwide attention for being a possible source of COVID-19 given past research into coronaviruses from bats. A U.S. intelligence report was inconclusive on whether the virus was created artificially or emerged naturally, but deemed that it was not a bioweapon and that the Chinese state had not been aware of it in advance.

Under such continued scrutiny into the heavily politicized origins of the virus, China introduced new Tianjin Biosecurity Guidelines at the Biological Weapons Convention on Thursday. Diplomatically spearheaded by China and Pakistan and involving scientists from major institutions worldwide, including Johns Hopkins University and the Secretariat for InterAcademy Partnership, the guidelines provide ten principles to support responsible biotechnology development and mitigate the misuse of biological research. The U.S. has questioned China’s own compliance with the guidelines.