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A broken ethernet cable is seen in front of a US flag and TikTok logo.
The clock is ticking for … TikTok
President Joe Biden on Wednesday signed a law that could see TikTok banned nationwide unless its Chinese parent company, ByteDance, sells the popular app within a year. The law was motivated by national security concerns.
TikTok promptly vowed to challenge the “unconstitutional” law in court, saying it would “silence” millions of Americans – setting the stage for a battle over whether the law violates First Amendment rights.
Expect delays. Eurasia Group’s US Director Clayton Allen is skeptical that such legal challenges will be successful, but they will still likely delay “any action well into 2025, putting the onus – potentially – on a second Trump administration.”
Though Donald Trump moved to ban TiikTok while he was in office, the former president is now attacking Biden over the law and calling for “young people” to remember the move on Election Day.
Notably, Biden’s campaign says it plans to continue using TikTok to reach younger voters.
What will China do? China expects delays in the process but is likely to prohibit a sale if it comes to it, according to Eurasia Group, our parent company. Beijing is unlikely to respond with a tit-for-tat approach targeting American companies and will instead focus on building a fortress economy that’s insulated from US containment efforts.
Taiwan's Vice President Lai Ching-te, who heads the ruling Democratic Progressive Party, raises his fist after winning the presidential election in Taipei on Jan. 13, 2024.
Taiwan elects pro-independence candidate, calls Beijing’s bluff
Taiwan, one of the freest democracies in Asia, went to the polls on Saturday for a highly anticipated election with implications for both cross-strait and US-China relations.
As we told you last week, Taiwan’s presidential campaign ended up being a close race between independence-leaning candidate William Lai Ching-te of the ruling Democratic Progressive Party, or DPP, and Hou You-ih of the Kuomintang, aka KMT, who favors closer relations with China.
On the day, Lai came out on top with 40% of the vote, beating Hou by almost 7 percentage points. But Lai’s DPP didn’t have the same success: The party lost control in the legislature, winning 51 of 113 seats, while the KMT netted 52, and the third party, the TPP, won eight.
The defeat of China’s preferred candidate is likely to ruffle some feathers back in Beijing. China sees Taiwan as a breakaway territory and is determined to reunify, by force if necessary, but so far Lai’s remarks have not been escalatory. Also, the DPP’s loss of the legislative majority means Beijing isn’t in the worst-case scenario and might preclude the most aggressive responses.
“Chinese initial reactions are unlikely to be escalatory,” says Eurasia Group expert Ava Shen, “given that Lai's remarks on cross-strait relations after the elections were fairly measured.”
While the DPP losing seats in the legislature, Shen says, “will make it more difficult for Lai to push his domestic agenda through the legislature,” he still has room to maneuver when it comes to foreign policy, cross-strait relations, and defense.
So all eyes now turn to Lai to see how much independence rhetoric he uses in the days and weeks ahead – talk that could help determine China’s response. Any real moves against Taiwan, which is backed by Washington, could lead to a wider conflict.
Chinese Premier Li Qiang speaks at his first press conference after his appointment to the post at the Great Hall of the People in Beijing last March.
China’s charm offensive: Li Qiang works to woo back foreign investment
China suffered an outflow of foreign direct investment last year (in Q3) for the first time since records began in 1979. It was a sure sign that foreign, particularly American, firms have chosen to “friend-shore” their business, pulling money out of China.
Investors are spooked by Xi Jinping’s vague national security laws and America’s policy of encouraging a reduction of investment in China, particularly in sectors deemed strategically important like semiconductors.
This helps explain why the Chinese are back in Davos in full force for the first time since Xi addressed the World Economic Forum in 2017. A delegation led by Premier Li Qiang will send the message that China is open to the outside world.
The consensus economic growth forecast for China in 2024 is 4.6%, which is strong by most countries’ standards but a slump from last year’s 5.2% and a shadow of its former ability to top 10%. A sluggish housing market and weak consumer confidence have not helped. Still, it is the geo-political chill that appears to have persuaded Xi to try to reverse the negative sentiment, starting with his meeting with President Joe Biden at the APEC summit last November.
Economists say that FDI only accounts for 3% of total investment but is important to China because it brings international best practices to domestic markets and enhances competition.
Li will be hoping that he can make up for lost Western dollars by persuading large Middle Eastern sovereign wealth funds from Saudi Arabia, Qatar, Oman, Kuwait, and the UAE to help reverse the FDI downturn.
Supporters of Lai Ching-te, Taiwan's vice president and the ruling Democratic Progressive Party's presidential candidate attend, a campaign event in New Taipei City, Taiwan, on Jan. 6, 2024.
Taiwan holds first big election of 2024
The world will be watching when Taiwanese voters head to the polls on Jan. 13 to choose their next president. The first in a series of elections with global ramifications in 2024, Taiwan’s vote will be a flashpoint in the tense US-China relationship. China regards Taiwan as a breakaway territory and has vowed to unify with it, by force if necessary. Taiwan has the backing of the US, which would feel pressured to come to the island’s defense in the event of a conflict with China.
The election is shaping up into a close contest between the independence-leaning candidate William Lai Ching-te of the ruling Democratic Progressive Party, or DPP, and Hou You-ih of the Kuomintang, aka KMT, who favors closer relations with China.
We asked Eurasia Group expert Ava Shen what to watch for.
What is the state of play of the race?
The DPP’s Lai remains the front-runner and has held a consistent lead in this election cycle, but his lead has been narrowing. According to the latest polling data available from Jan. 1-2, he is about five points ahead of the KMT’s Hou, who started gaining ground in late November. Winning the party’s official nomination, with Jaw Shaw-kong chosen as his running mate, has helped Hou consolidate the support of the KMT base. The end to efforts to broker a presidential joint ticket with Ko Wen-je of the Taiwan People’s Party, or TPP, has also helped.
This momentum gives the KMT a lot of confidence in its ability to mobilize a last-minute surge in support, possibly thanks to strategic voting by TPP supporters who don’t want another DPP administration. Lai remains favored to win, but it’s going to be close. It’s also noteworthy that Lai, if he wins, would probably do so with less than 50% of the vote. That marks a shift from the elections of 2016 and 2020 when current President Tsai Ing-wen comfortably cleared that threshold.
What would a Lai victory mean for relations with China?
Beijing would probably have an immediate negative reaction. It has signaled multiple times that it is deeply wary of Lai, who has a history of comments in favor of full independence for Taiwan, a red line for China. It would respond in two ways. First, it would probably reduce the number of Taiwanese products that are subject to preferential tariff rates under the Economic Cooperation Framework Agreement, the cross-strait trade agreement signed in 2010. In a warning shot to Taiwan’s voters, it excluded 12 Taiwanese products from the agreement in mid-December.
Second, China would likely intensify what it has already been doing in the military sphere. If Beijing judges any of Lai’s post-election remarks to be provocative, it will consider flying larger numbers of fighter jets over the Taiwan Strait, deploying more coast guard or naval vessels, and possibly moving those military assets closer to Taiwan’s main island. It could enter for the first time Taiwan’s 24-nautical-mile contiguous zone.
But Lai has moderated his rhetoric recently, hasn’t he?
Yes. He has indicated on the campaign trail that he would maintain the status quo and continue the approach that Tsai has taken to cross-strait relations. Still, from Beijing’s perspective, this is not enough. It does not like Tsai’s cross-strait policies but believes she has exercised restraint in managing tensions. It views Lai as more reckless.
Nonetheless, as I said, Lai is not likely to win by a large margin, and his party will probably lose its majority in the legislature. This is important to Beijing because it sends a signal that the DPP doesn’t have complete control over the island’s politics and that not everyone supports independence. That gives Beijing some hope that the idea of unification is not dead.
So, we think tensions are likely to rise in the event of a Lai victory, but it won’t be a catastrophic situation.
And what would a Hou victory mean for cross-strait relations?
If Hou wins, there is less of a risk of Beijing increasing the pressure against Taipei in the short term. However, there is a risk it will resume aggressive tactics over the long term if Hou doesn’t agree to upgrade cross-strait ties economically and politically. China wants to move toward more regular contact between government officials on both sides and take steps toward unification.
Hou has said he wants to start with more cultural and economic engagement, and if things go well, gradually progress to more political exchange, something that Taiwanese society broadly opposes. So, he's saying he wants to put off the political engagement that Beijing is seeking, and the question is, how long is Beijing going to patiently wait?
What’s at stake for the US in this election?
The US’s official stance is that it has no preferred candidate, and I think it has been consistent in maintaining this approach even in private interactions with Taiwan counterparts. The bilateral relationship is robust, and all three of the main Taiwanese parties are committed to close US ties.
That said, President Joe Biden’s administration likely recognizes that a Lai victory has the potential to jeopardize the recent stabilization of the fraught US-China relationship if it provokes an aggressive Chinese response, putting the US under pressure to offer a gesture of support. As Eurasia Group noted in its Top Risks 2024 report, Lai is one of a handful of “dangerous friends,” a group of friendly world leaders who may draw the US into expanded conflicts this year.
Edited by Jonathan House, Senior Editor at Eurasia Group
Flags of the European Union and China are seen in this multiple-exposure illustration.
Viewpoint: Amid deepening divisions, EU and Chinese leaders set to meet this week
European Commission President Ursula von der Leyen and European Council President Charles Michel will visit Beijing on Dec. 7 for in-person meetings with President Xi Jinping and Premier Li Qiang. The two sides want to show a commitment to dialog at a time when their relations are coming under mounting strain, as underscored by the recent opening of an EU probe into unfair Chinese competition in the electric vehicle sector.
Similar to last month’s meeting between Xi and US President Joe Biden, this week’s EU-China summit is not expected to produce any major breakthroughs. To find out more, we spoke with Emre Peker, a director for Eurasia Group’s Europe practice, and Anna Ashton, a director for the China practice.
Why is this meeting happening now?
Emre Peker: The last time Xi and the EU’s top two officials met in person was in 2019 in Beijing, before the pandemic struck. They have met virtually a couple of times since. This week’s in-person gathering is meant to showcase Brussels and Beijing’s willingness to maintain a healthy dialog despite their growing differences.
Anna Ashton: Both sides have sought increased engagement since Beijing began lifting its strict COVID policies toward the end of 2022. The EU-China trade and investment relationship is crucial for both. Other issues of common concern include climate change, global health, and the Russia-Ukraine conflict.
What does the EU want to achieve at the summit?
Peker: Among other issues, the EU wants to address growing imbalances in its economic relations with China as well as the war in Ukraine. A key priority is to highlight the EU’s willingness to take measures to protect itself against Chinese industrial subsidies and overcapacity, which are contributing to a record-high trade deficit with China. Brussels will also seek greater Chinese collaboration on enforcing sanctions against Russia by presenting a list of Chinese companies that will be targeted for penalties unless Beijing helps halt the trans-shipment of dual-use goods. Lastly, the EU will seek to convince Beijing that Europe’s stance on China is distinct from that of the US, particularly on economic matters, to obtain more cooperation and avert escalating tensions.
What does China want?
Ashton: Protecting trade and investment ties with the EU has grown more important for Beijing given the economic headwinds it faces at home. Moreover, Chinese authorities worry about the EU’s drift toward China policies resembling those of the US and want to hammer out a distinct and more cooperative path for China-EU relations. But progress is likely to be limited given their differences on a range of issues. These include the flood of Chinese EVs entering the EU; EU steps to bolster export controls on dual-use goods — particularly tech products — and consider outbound investment screening; the obstacles faced by European companies to doing business in China; and European accusations of Chinese circumvention of sanctions on Russia.
What are the best-case outcomes we can expect?
Peker: On the economic front, a best-case outcome would be an agreement from Beijing to immediately remove trade barriers for certain EU products (such as medical devices and infant formula) and take steps that would facilitate greater market access and investment opportunities for European companies generally. On the diplomatic front, China would proactively collaborate in enforcing sanctions on Russia and commit to more diplomatic engagement on Ukraine’s 10-point peace plan.
Ashton: China’s ties with the EU are strained, but not as fraught as those with the US, so theoretically there is potential for deliverables that equal or surpass those of the Biden-Xi summit, where the two sides agreed to cooperate on bilateral irritants such as fentanyl precursors and military-to-military dialogue. China could offer narrow concessions on market access, but given the limited receptiveness shown to EU trade and investment concerns, does not appear likely to offer broad concessions. Though China and the EU continue to harbor sharply different views about the causes of the war in Ukraine and essential terms for its resolution, Beijing could signal a willingness to participate in future rounds of talks.
How do you expect EU-China relations to evolve over the medium term?
Peker: Given the expectation that the summit will not deliver any major breakthroughs, the EU will likely continue to harden its stance against China, raising the risk of Chinese commercial retaliation. The EU will not likely be able to convince Beijing of its autonomy from the US on China policies, hurting EU ambitions to establish more constructive engagement with China. Therefore, the EU is likely to seek open communication channels and stable commercial ties in the medium term, while trying to reduce dependencies on China in the long run.
Ashton: Beijing is unlikely to shift the EU away from its assessment that China has become an economic competitor. Therefore, China will continue its efforts to drive a wedge between the EU’s and the US’s approaches to relations with China, but its success in this regard will largely be determined by the politics of EU member states and the policies of the next administration in Washington.
Edited by Jonathan House, senior editor at Eurasia Group.
Hou Yu-ih, left, candidate for Taiwan's presidency from the main opposition Kuomintang Party, and Jaw Shaw-Kong, vice presidential candidate, wave at the Central Election Commission in Taipei on Nov. 24, 2023.
Taiwan’s unity ticket falls apart at the altar
The opposition’s shotgun wedding is off in Taiwan. Just two weeks ago, with the blessing of Beijing, the Kuomintang Party and the Taiwan People’s Party announced their intention to field a single candidate in the country’s Jan. 13 election in the hopes of defeating the ruling Democratic Progressive Party. It was a move cheered by China, which is no fan of the current frontrunner, DPP’s pro-independence candidate, William Lai Ching-te.
But on Thursday, negotiations collapsed on the political equivalent of a reality TV show as business magnate and independent candidate Terry Gou moderated a live broadcast of efforts to break the deadlock over which opposition party’s candidate should be on the ballot. After mutual accusations of bad faith, KMT leader Hou Yu-ih read a private text message from TPP rival Ko Wen-Je that said Gou needed to “find a reason” to drop out of the presidential race. In a dramatic finale, KMT negotiators walked off the set as the cameras were rolling.
Both opposition parties have now registered separate candidates in the race. The entire spectacle played into the DPP’s hands, prompting Lai to ask, “Should we dare to hand over the business of running the country to these people?”
The opposition now has little chance of defeating Lai, who further boosted his candidacy last week by naming Hsiao Bi-Kim, Taiwan’s representative to the United States, as his vice-presidential running mate. Since Beijing considers the pair a “union of pro-independence separatists,” analysts agree that a Lai-Hsaio victory would likely further degrade already hostile relations between Taiwan and China, leading to greater military escalation and economic coercion.
U.S. President Joe Biden meets with Chinese President Xi Jinping on the sidelines of the G20 leaders' summit in Bali, Indonesia, in November 2022.
Can US & China keep things calm ahead of Biden-Xi meeting?
China’s second highest-ranking leader, former Chinese Premier Li Keqiang, died suddenly late last week of a heart attack, aged 68. An economist, the English-speaking Li was known for his openness to private business and Western ideas. He and Xi Jinping did not see eye-to-eye on economic policy, and as Xi’s power grew, Li was sidelined and notably forced out of the Party’s Standing Committee last October, two years short of the usual retirement age of 70. Li was critical of the damage caused by Xi's heavyhanded zero-COVID approach to both the economy and average Chinese citizens.
While the official response to Li’s death has been muted, there has been an outpouring of emotion within China, notably on social media. Already, there are reports of a crackdown on VPN use to reduce access to the parts of the internet not controlled by the Communist Party. The fear is that mourning for a popular, liberal, former leader could spur criticism of Xi’s administration at a time of general economic malaise – just as the death of Premier Zhou Enlai triggered the “democracy wall” movement of the late 1970s, and grief for Party leader Hu Yaobang gave rise to the Tiananmen Square protests in 1989.
Li’s death also comes just before the planned meeting between Xi and US President Joe Biden in San Francisco in mid-November. The high-level sitdown would cap a series of meetings between the White House and other Chinese leaders, including one between Biden and China’s Foreign Minister Wang Yi last Friday in Washington.
But Yi warned after that meeting that the "road to the San Francisco summit will not be a smooth one” and said that instead China and the U.S. should "return to Bali.” He was referring to the time Biden and Xi met – at the Group of 20 summit in Bali last November, where the two leaders discussed Taiwan, competition, and communication.
Still, there are signs that China and the US are keen to mend some fences. Calif. Gov. Gavin Newsom’s trip to China last week saw him meet with both Wang and Xi, which came on the heels of Senate Majority Leader Chuck Schumer’s visit to China. The recent flurry of diplomacy signals that both countries want to improve ties ahead of Xi’s meeting with Biden – and well before Taiwan’s presidential elections in January.
US Secretary of State Antony Blinken speaks to members of the media before leaving Cairo, Egypt, on Sunday.
World powers weigh in on Israel-Hamas War
As the crisis in Israel and Gaza deepens, various world powers are weighing in and offering to help mediate, some for their own geopolitical interests.
Washington repeatedly offered unwavering support to Israel following the Hamas attacks, but it is now also trying to address the humanitarian crisis in Gaza. In a phone call Saturday with Palestinian Authority President Mahmoud Abbas – whose authority extends primarily to the West Bank – President Joe Biden pledged his full support for "urgently needed humanitarian assistance to Palestinian people, especially in Gaza."
On Saturday, Biden spoke with Israeli Prime Minister Benjamin Netanyahu, reiterating US military support for Israel but also broaching the need for international coordination to “ensure innocent civilians have access to water, food, and medical care.” In turn, on Sunday, the US announced it was moving a second aircraft carrier into the region, and Israel restored the water supply to southern Gaza, though Palestinians have criticized the move as a “publicity stunt” since much of the infrastructure has been damaged by shelling or is unusable due to a lack of electricity.
In a broadcast interview on Sunday, Biden said that Israel reoccupying Gaza would be “a big mistake."
Meanwhile, US Secretary of State Antony Blinken announced the reopening of the Egyptian-controlled border crossing into Gaza and that the US was working with Egypt, Israel, and the UN to expedite assistance across the border, but there are conflicting reports as to whether a deal is in place.
Blinken has been on a whirlwind diplomatic tour in recent days, visiting with six of Israel’s neighbors in an attempt to prevent escalation. On Monday, he returned to Israel as its military prepared for an offensive in Gaza by land, sea, and air, with emphasis on “significant ground operations.”
Meanwhile, China is also getting involved. Beijing is reportedly in “intensive communication with all parties to push for a ceasefire and an end to the fighting,” with a focus on the humanitarian crisis in Gaza. On Friday, Zhai Jun, China’s special envoy to the Middle East, met representatives from the 22-member Arab League in Beijing, seeking to broker a peace agreement between Israel and the Palestinians in conjunction with Egypt. The next day, Chinese Foreign Minister Wang Yi spoke with Saudi Foreign Minister Faisal bin Farhan Al Saud and said that Israel’s actions have extended beyond self-defense. China’s top diplomat, Wang Li, said that "The crux of the issue lies in the fact that justice has not been done to the Palestinian people.”
Statements like these, together with Beijing’s unwillingness to condemn Hamas, signal that China may be returning to its stance from the 1960s and 70s when it openly supported the Palestine Liberation Organization’s bid for statehood. Analysts believe China has concluded that Israel will always align with US interests and has “picked a side” to gain favor among Arab nations and win their support for its larger authoritarian agenda.
The conflict between Israel and Hamas also provides fertile ground for Russia to divert attention from its war with Ukraine. Russian diplomat Konstantin Gavrilov told the pro-Kremlin Izvestia newspaper, “Ukraine’s sponsors will be distracted by the conflict in Israel … the amount of military aid will go down … and the course of the operation may turn sharply in [Russia’s] favor.” Nonetheless, on Friday, Russian President Vladimir Putin offered to mediate the conflict, saying that “Russia is ready to coordinate with all constructive partners.”
While no one expects Moscow to play a pivotal role in talks, it has sway with a number of parties involved, including Iran, which has threatened “far-reaching consequences” if Israel enters Gaza. Russia also has ties with Qatar, and a state media outlet reported that Russian Deputy Foreign Minister Mikhail Bogdanov may soon meet with Hamas officials in Qatar to discuss the potential release of hostages kidnapped by Hamas.
Apart from Iran, Qatar arguably has the most influence over Hamas as its government has reportedly supported Hamas to the tune of $30 million a month. Qatar is also able to put financial pressure on Iran, as evidenced by its recent agreement to a US request that it not allow Tehran access to $6 billion in Iranian funds that were unblocked as part of a prisoner swap in September.