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China’s Two Sessions: It’s a Xi show
On Monday, Beijing scrapped a closing press conference for its annual “Two Sessions” meeting of its rubber-stamp parliament, pausing a three-decade long annual tradition for China’s premier (the No. 2 guy). That means the foreign press will lose a rare chance to speak to Premier Li Qiang, one of China’s most powerful people.
But it also robs Li himself of a platform that other Chinese leaders have used to build their own brands. Li’s predecessor, Li Keqiang, earned himself the moniker “the people’s premier” after he railed against pervasive rural poverty during the 2020 Two Sessions presser.
The opacity reflects what Eurasia Group called "Maximum Xi” in its top risks report last year, as President Xi Jinping reacts to increasing challenges by centralizing his power even more.
"Under Maximum Xi, what Li Qiang might have said in the closing presser wouldn't matter anyway,” says Lauren Gloudeman, a China expert at Eurasia Group. “He was only going to say what was approved."
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.
US CEOs too influential on China policy, says Rahm Emanuel
US CEOs are too cozy with Beijing, says US Ambassador to Japan Rahm Emanuel.
At the APEC summit last November in San Francisco, heads of state and diplomats from nations in the Asia-Pacific met to address a wide array of strategic interests and challenges. But no other meeting was as closely watched as that between US President Joe Biden and Chinese President Xi Jinping. As successful as that meeting may have been on a PR level (at least according to the delegations of each leader), one man present took special note of what happened afterward. US Ambassador to Japan, Rahm Emanuel, told Ian Bremmer about that summit during an exclusive interview in the latest episode of GZERO World, filmed at the Ambassador's residence in Tokyo, Japan.
"President Xi goes to have a meeting with American CEOs who give him a standing ovation, though he hasn't yet said anything," recounted Ambassador Emanuel. "The President of the United States goes to an event, and all the heads of state are there. That tells you about alliances, that tells you about the interests of China."
Bremmer then noted that it also tells you something about the interests of American CEOs. to which Emanuel responded: "I think the American CEOs are way too influential in American foreign policy in this region, way too influential."
Catch GZERO World with Ian Bremmer every week at gzeromedia.com/gzeroworld or on US public television. Check local listings.
Evergrande’s last stand delayed
Embattled Chinese property developer Evergrande Group was meant to be in a Hong Kong court today, facing the once-unthinkable prospect of liquidation. The real estate colossus, which owns 1,300 projects in over 280 cities across China, has seen its shares plummet by 99% after the company defaulted on its $300 billion debt in 2021.
Since then, lawyers have come before bankruptcy judge Linda Chan seven times to attempt a restructuring, without success. She had indicated this was likely their last hurrah, but the developer was unexpectedly granted an adjournment on Monday to Jan. 29, 2024, giving it more time to finalize a revamped offshore debt-restructuring plan. If they fail, bankruptcy would have huge repercussions for shareholders, property owners, and the Chinese economy.
Shareholders: Unwinding Evergrande’s business structure could take years and provide little return for investors. The group has three companies listed on the Hong Kong Stock Exchange, including its holding company, as well as thousands of subsidiaries in China in a range of industries, such as electric vehicle manufacturing, life insurance, and sports entertainment.
Homeowners: Across China, an estimated 1.5 million Evergrande customers have been saddled with unfinished homes. In a country where real estate accounts for 80% of household wealth and 30% of the economy, the concern is that Evergrande is simply “too big to fail.” To staunch the bleeding, Beijing’s regulators have drafted a list of 50 developers eligible for financing support.
Financial institutions: Evergande’s troubles have produced a “contagion effect” from real estate development to real estate financing and a similar crackdown by authorities in that sector. Police are now investigating Zhongzhi Enterprise Group, a major shadow bank in China that lent billions of yuan to developers and is now insolvent with up to $64 billion in liabilities.
Biden calls Xi a dictator
Joe Biden and Xi Jinping spent four hours together on Wednesday, coming to agreements on curbing fentanyl production and improving military communication. But Biden referred to the Chinese leader as a “dictator” in a press conference afterward, which suggests there are limits to the rapprochement.
The two men met on the sidelines of the Asia-Pacific Economic Cooperation summit in San Francisco, Calif., with both sides having signaled a desire for better cooperation beforehand. It was the first meeting between them in more than a year and came amid historically high tensions. Their long chat and new agreements suggested an easing of tensions, but Biden’s off-the-cuff remark has irked the Chinese.
“Well, look, he’s a dictator in the sense that he is a guy who runs a country that is a communist country that’s based on a form of government totally different than ours,” Biden said. China’s foreign ministry was less than impressed and called the dictator label “extremely wrong and irresponsible political manipulation.”
Much like China’s floating of a spy balloon in US airspace earlier this year quickly popped holes in Biden and Xi’s diplomatic progress following their meeting at last year’s G20 summit, will Biden’s remark have a similar effect?
Justin Trudeau also attended the APEC summit in California, and Canada-China relations are also at a low ebb. At last year’s G20 in Indonesia, Trudeau and Xi exchanged tense words after the PM complained about Chinese interference in Canadian politics. Under political pressure over the government’s apparent failure to deal with the issue, Trudeau in September announced a public inquiry into the matter.
While Ottawa will stay closely aligned to the US on such matters, it remains to be seen whether it will follow Washington’s lead on improved diplomacy with Beijing.
We’ll be watching to see whether Trudeau manages the trip without squabbling further with Xi — the two are not expected to meet. “[Canada’s] goal is to stop the hole from getting deeper in Asia," Carlo Dade, director of the trade and investment center at the Canada West Foundation, told the CBC.
Opposition unity in Taiwan lifts hopes in Beijing
On the sidelines at Wednesday’s APEC meeting in San Francisco, Presidents Joe Biden and Xi Jinping received news that might make US-Chinese relations a little less tense, as Taiwan’s upcoming presidential election campaign just got a lot more interesting.
For months, the current vice president, William Lai of the Democratic Progressive Party, has been favored to win on Jan. 13, in part because his two main challengers, Hou Yu-ih of the Kuomintang Party and Ko Wen-je of the Taiwan People’s Party, were expected to split the anti-Lai vote. But on Wednesday, the two opposition parties announced they would form a unity coalition behind a single candidate to defeat Lai and the DPP.
This news sharply increases the odds of an opposition victory, an outcome that would be welcomed as good news in Beijing. China’s government considers Lai a champion of Taiwan’s independence movement, while the opposition favors talks and closer ties with the mainland. For the same reason, an opposition win, still far from a sure thing, would also ease China-US tensions, which have run high as China applies heightened military pressure on the island. Most experts consider a war over Taiwan unlikely over the next year, but near-miss encounters involving US and Chinese naval vessels and aircraft in the Taiwan Straits have raised serious concerns in recent months.
It remains unclear for the moment whether the unity opposition candidate will be Hou or Ko. That will depend on polling over the next few days, and experts say it’ll be a close race. But for now, both candidates appear set to move forward on a joint ticket.
Meanwhile, Lai, who’s polling at 35.2%, remains confident he can still win.
Biden & Xi set to agree on regulating military use of AI
Ian Bremmer shares his insights on global politics this week on World In :60.
Will Biden and Xi come together to regulate military use of AI?
I think that's one of the areas that we are going to see a level of cooperation. The Chinese are concerned about, first, the Americans being ahead of them in AI, but secondly, about the fact that this could escalate and spiral into mutually assured destruction quickly, if there isn't a level of transparency. That's very different from the unwillingness of the Chinese to engage in high level military talks, for example, on South China Sea or on Taiwan recently. This is an area that I think will be constructive. I'm glad to see it.
Can the Qatari mediation secure a breakthrough for hostage release in Gaza?
Well, we've been hearing about this for weeks now and it's been imminent and then not happening. Imminent, Not happening. I do think that the level of pressure on Israel, on the Israeli government for not having secured the release of women, of children, I mean, we're talking about a couple of hundred plus civilian hostages living in the most unimaginably horrible environment in Gaza. And I do believe that a breakthrough is pretty likely. We're also going to find out that a lot of these hostages, of course, are already dead. But I'm hopeful and let's keep fingers crossed on that.
Has time run out for Ukraine's counteroffensive?
The much-vaunted counteroffensive, yet it looks like they're not going to be able to take much more territory at this point. And it's hard to imagine they're going to have the military capacity or the troop capacity to do anything else in the foreseeable future. And that means that de facto, the 18% of Ukraine's territory that Russia presently occupies, they're going to continue to occupy going forward. No one's going to accept a partition. No one is going to say that Russia legitimately owns that territory because it is Ukrainian territory. But the reality is unacceptable. And that is where we're going to be an uncomfortable position going forward.
Blinken comes home, Biden gears up for Xi
US Secretary of State Anthony Blinken wrapped up a tour of Asian nations last week, as the United States worked to shore up support for its positions on issues including Russia’s war in Ukraine, China’s increased belligerence toward Taiwan, and the Israel-Hamas war in the Middle East.
On Thursday, Blinken met with South Korean officials including President Yoon Suk-yeol. The two countries reportedly aligned on their approach in the three arenas of conflict. According to South Korean intelligence reports, the matters are closely related. During a closed-door briefing to lawmakers last week, South Korea’s main spy agency said it believes that North Korean leader Kim Jong Un instructed officials to “comprehensively support” Palestinians and that the North could be considering selling weapons to terrorist organizations in the Middle East.
Then it was off to New Delhi, where Blinken and US Secretary of Defense Lloyd Austin met with their Indian counterparts and engaged on a host of issues including a diplomatic dispute between India and Canada over the alleged assassination by Indian forces of a Sikh separatist on Canadian soil, and increased hostilities on the border of India and China.
Blinken’s tête-à-têtes came on the heels of the G7 summit in Tokyo on Nov. 7 and 8, where Japanese and British defense ministers reiterated their preference for a two-state solution in the Middle East. The G7 later issued a joint statement that also condemned “destabilizing activities” by Iran and called on Tehran to de-escalate tensions in the region.
Blinken’s tour comes ahead of the first meeting between US President Joe Biden and Chinese President Xi Jinping in over a year, set for this week in San Francisco. While significant, expectations for agreement and action are low. “We’re not talking about a long list of outcomes or deliverables,” a senior administration official told reporters at a press conference last week. “The goals here really are about managing the competition, preventing the downside risk of conflict, and ensuring channels of communication are open.”
The two leaders’ agenda includes military communications, human rights, and the South China Sea. According to Eurasia Group Analyst Anna Ashton, much of the focus will be on Taiwan's presidential election, set for Jan. 13. “The candidate most likely to win based on current polling is Lai Ching-te, a member of the Democratic Progressive Party who draws support from Taiwan's most dedicated independence activists. That brings us to a second watchpoint in May, when Taiwan’s next president will be inaugurated,” says Ashton. And to another potential flashpoint for tensions between China and the US.