EU-China Briefing - 10 August 2020

Written By GS

YOUR WEEKLY SHOT OF EU-CHINA NEWS

BY FLAVIAN BERNEAGĂ AND GRZEGORZ STEC

Click & Read:

  1. Pompeo’s NATO-China Quid Pro Quo

  2. US Plans to Ban TikTok, the EU Isn’t Interested

  3. Huawei Skepticism Signs Visible Across Europe

  4. Little Leipzig

  5. Beidaihe - Is it on?

 

1. Pompeo’s NATO-China Quid Pro Quo

US Secretary of State Mike Pompeo is expected to undertake a tour of Central European countries between August 11-15.

► In visits to the Czech Republic, Slovenia, Poland (and maybe Austria), he is expected to promise the redeployment of US troops that were retracted from Germany;

► The tour is in line with his hopes that NATO could coalesce to become the medium for rallying allies on its China policy, but it also comes against a background of intensified Sino-Serbian military relations.

Eurotrip

Following the announcement that the US will pull out 12,000 troops from Germany, Pompeo is now scouting for countries to relocate them.

  • Pompeo’s visits to Prague, Ljubljana, and Warsaw would thus serve to fortify the current US presence in those respective countries, while also reinforcing relations with some of the US’ closest allies in Europe.

  • Furthermore, US Defense Secretary Mark Esper said on August 6 that Romania and the Baltic countries could also get a military boost in their current numbers.

  • It appears that the pullout announced last month is rather a redeployment of troops in countries that are closer allies to the US. In contrast, Germans do not seem to be grieving after the loss: 47% of Germans agree with the reduction and 66% would like the US to also remove its nuclear missiles from German territory.


The China Tit-for-Tat

Pompeo’s tour may also have a strong China angle - it must be viewed in the context of his speech on “Communist China and the Free World”.

  • Back in July 23, Pompeo called on “free nations” to “defend freedom” and unite behind the US to contain China. Promises made to CEE countries are bound to come with pressures to echo the US policy on China.

  • By creating momentum in Central Europe, Pompeo could also seek synergy with NATO General Secretary Jens Stoltenberg, whose core vision for NATO 2030 involves the alliance responding to the challenges posed by China.

  • Developments in the Balkans are another impetus for Pompeo. On August 3, Serbia purchased a new set of medium-range, radar-guided surface-to-air missiles from China, which fostered Beijing-Belgrade cooperation nurtured in the response to the pandemic.

TAKEAWAYS

 

► REINVENTING NATO
Keep an eye out for the messaging and rhetoric Pompeo will employ in his tour. It is likely to involve a lot of references to ‘containing the Communist menace’, a message that also resonates better with countries that experienced Communist regimes themselves. As CEE countries gradually take a more critical stance on China, it is noteworthy to recall the voices that have been convinced the 17+1 was a trap of Chinese influence from which CEE member states could surely not escape.

The countries Pompeo will visit are not picked out of the blue, either. At least in the cases of Poland (which is part of the so-called “2-percenters”) and the Czech Republic, their leaders have previously displayed skepticism towards China (save a few exceptions, such as Miloš Zeman) and, conversely, have been very invested in NATO spending and troop presence, but also in adjacent matters related to China, such as 5G.

Screen Shot 2020-04-06 at 3.20.06 PM.png

READ MORE

 
 

2. US Plans to Ban TikTok, the EU Isn’t Interested

On August 6, President Donald Trump announced an executive order that would see TikTok and WeChat banned within 45 days in the US.

► Citing “national security concerns”, Trump stated the ban will not take effect if the two companies are sold by their Chinese parent companies;

► European policymakers don’t agree and argue an outright ban is unnecessary, though concerns over TikTok’s data processing methods remain; 

► Trump’s decision seems to pertain more to his administration’s wish to further escalate tensions in relations with China as a disguise for the mishandling of the virus and the Black Lives Matter protests. It once again shows the difference in approach to China policy between Transatlantic partners.

Get Sold or Get Out

An executive order signed by Donald Trump could ban TikTok and WeChat in the US by September 15.

  • In a meeting with Microsoft (a leading potential buyer) on August 2, Trump implied their sale would have to be done to a US company, but the executive order does not specify such a condition.

  • The reasons for the ban are allegedly based on national security concerns, with the order stating that TikTok "automatically captures vast swaths of information from its users".

  • The order also explicitly argued that TikTok’s flaw is owed to it being an app “developed and owned by companies in the People's Republic of China”.

Europe Shrugs

European policymakers are not interested in following Washington’s example. Even so, TikTok is still likely to be scrutinized by the European Data Protection Board (EDPB).

  • That is because, unlike Huawei, TikTok is not seen in Europe as critical for important sectors of digitalization (i.e., 5G), and is, as a result, a “relatively benign” app.

  • As ByteDance is weighing its options to move TikTok out of California, a number of UK lawmakers have been lobbying to establish its new headquarters in London.

  • In the meantime, TikTok announced on August 6 that it will invest €420 million in building a data center in Ireland.

  • This doesn’t mean it’s all milk and honey for ByteDance. The EDPB set up a taskforce to investigate TikTok’s data processing and privacy practices, and determine if they comply with the EU’s GDPR.

  • As mentioned in a previous news bite, Mike Pompeo will be headed to Central Europe to discuss troop relocation. Given the China element of his trip, it is likely TikTok and WeChat will make their way onto the agenda too.

Smokescreens

The heavy rhetoric aimed all of a sudden at TikTok pertains rather to a brand of “information-nationalism” that distracts from more pressing problems.

  • It is part of wider efforts to put up a new Cold War narrative, targeting China as a manner of shifting public opinion from issues related to COVID-19 and BLM protests, both of which present a challenge to Trump’s chances for re-election.

  • Furthermore, the portrayal of China vs US in values-based extremes regarding privacy overlooks the fact that the US itself has not passed significant legislation protecting data privacy in recent years, not even after the Snowden scandal.

TAKEAWAYS

 

► ANOTHER POINT IN CASE
TikTok is yet another case in point of the difference in approach between the US and the EU, a tendency we have mentioned in previous weeks. While the Trump administration is trying to paint everything as political, the EU tries to avoid unnecessary escalation and present risks through a technical lens. So, decisions on Huawei’s GDPR compliance are not made by a tweet from von der Leyen, but by an investigation done by experts in the European Data Protection Board.

The divergence in approach stems from a divergence in interests. The White House has plenty of interest to spur anti-China rhetoric. It is a topic that ‘sells’ for cheap to Donald Trump’s political base, which helps him divert attention and rally his electorate ahead of the November elections. The EU, on the other hand, does not stand to benefit from over-hawkishness. First and foremost, an assertive but constructive relationship is what is needed to push forward the CAI, but investment is not the only topic with salience. The EU is hoping that, through assertive dialogue, it can convince Beijing that it will become very isolated if it doesn’t backtrack on Hong Kong and Xinjiang.

Screen Shot 2020-04-06 at 3.20.06 PM.png

READ MORE

 
 

3. Huawei Skepticism Signs Visible Across Europe

Last month, we discussed the latest developments for Huawei in the big markets: Germany, France, and Italy. This week, we invite you to consider a few cases from smaller EU member states.

Romania

While authorities in Bucharest do not explicitly mention Huawei, the regulations they issue would virtually rule out the Chinese company from the market.

  • Legislation released on August 5 excludes companies that are controlled by a foreign government, those that don’t have a transparent ownership structure, those that had instances of unethical corporate behaviour, and those that do not operate in a country with an independent justice system.

  • Huawei is not in line with at least two of the regulations: those related to unethical behaviour and to the independent justice system.

  • The recent legislation is consequential with a 5G memorandum signed by Romanian President Klaus Iohannis in August 209 with the US, which pledged to “avoid the security risks that accompany Chinese investment in 5G telecommunications networks”.

Greece

Greek PM Kyriakos Mitsotakis said in a webinar on August 5 for the Aspen Security Forum that fortunately, “Huawei doesn’t have a strong presence in Greece in the core network, and it will remain so”.

  • Mitsotakis committed to keeping the core network “Huawei-free” and to decreasing the presence of Huawei antennas in Greek telecom operators.

  • He further called Huawei “a real security concern for the US, but also for Europe” and indicated Greece will align itself with European regulation on 5G and is already underway to implement its 5G framework by the end of 2020.

Slovenia

Authorities in Ljubljana announced they will sign a Joint Declaration on 5G Security with the US, an important move in a country that is hoping to have 5G coverage in over 33% of the country by the end of 2020.

  • Huawei’s regional branch responded by arguing that removing Huawei is a decision based on groundless accusations that would reduce market competitiveness and inflict higher prices on consumers.

Sweden

Swedish singer Zara Larsson announced she has ended her professional collaboration with Huawei, after realizing the “Chinese state is not a nice state”.

  • After signing her agreement with Huawei in the spring of 2019, Larsson said Huawei is simply a “privately owned company in China that is now launching a good mobile phone, more than that I’m not thinking about or commenting”.

  • However, on August 4, Larsson said she was “hindered” to speak up on issues related to Hong Kong or Xinjiang.

  • Huawei itself issued a statement saying the contract had ended in 2019, as scheduled, and not because of the artist’s calls for cancellation.

TAKEAWAYS

 

► HUAWEI SKEPTICISM ON A RISE
As we showed in our July 13th briefing, general skepticism towards Huawei has been brewing in France and Italy (and even in Germany, where Huawei has not been issued a ban or phase out period). The cases we show above, from Northern, Southern, Central, and Eastern Europe, show that the mood is more widespread and that some sort of phase out of Huawei in Europe is only a matter of time. This will likely become even more evident once Merkel steps down. Take also into account Pompeo’s charge, which we discuss in the previous news bite, which constitutes an additional impetus for these countries to go beyond the regulation stipulated in the Commissions’ 5G Toolbox.

Screen Shot 2020-04-06 at 3.20.06 PM.png

READ MORE

 
 

4. Little Leipzig

In the absence of an in-person summit in Leipzig in September, the German Presidency is planning a videoconference to maintain both dialogue and reform pressure on China.

► Initially, a summit between Xi Jinping and all EU and member states leaders was supposed to happen in Leipzig in September, but plans were altered by the virus and by cooler relations between EU capitals and Beijing;

► Nonetheless, in the hopes of creating a single China policy at the EU level, Merkel, von der Leyen, and Michel will seek to have a video conference with Xi Jinping mid-September;

► The timing is particularly important, as Merkel’s end of term is likely to spell a harsher stance on relations between Berlin and Beijing in 2021.

FYI

Recall that on June 4, the EU27-China Summit that was expected to happen in September 2020 in Leipzig was postponed.

  • The decision to delay it for a later date was quite significant, since the EU was hoping to enter the summit with a deal reached on the CAI. The deal was also seen as a significant achievement constituting Angela Merkel’s legacy as Chancellor of Germany and key EU leader.

  • The official reasoning given for the postponement was the COVID-19 pandemic, but behind the scenes, the EU side was not happy with China’s commitments to leveling the playing field, to reaching its climate targets, and increasingly evident systemic rivalry.

Maintaining the Pressure

According to a Süddeutsche Zeitung report on August 7, Angela Merkel has not given up plans for a meeting between Xi and the EU27 heads to replace the postponed Leipzig Summit.

  • The videoconference is scheduled for September 14 and the participants in the call on the EU side would be Charles Michel, Angela Merkel, and Ursula von der Leyen, though the group could be expanded to also include Emmanuel Macron.

  • The Summit would be employed to convey the EU’s demands on market access and on Hong Kong, but it would also serve to highlight that the EU is not adopting the same hawkish attitude towards China that has been taken in Washington.

  • The summit would also showcase internal European unity on a China policy. German Minister of State for Europe Michael Roth said that lack of cohesion is the EU’s “Achilles’ heel” and that individual member states must work to resist the prioritization of bilateral relations that China is promoting.

  • As a result, Roth argues, the EU has to become the “relevant framework for action and orientation” so that Europe can diversify its supply chains and become less dependent on China in matters related to 5G or health, while refusing calls for decoupling.

  • Charles Michel is set to call an extraordinary European Council on September 24-25, which is going to touch on the EU-China relation, and could allegedly include a decision to hold a video conference summit between the EU’s and China’s top leadership.

Projekt bez tytułu.png

TAKEAWAYS

 

► THREE KEY ISSUES
Three things that will be important in this summit: a display of EU unity on China; the development of systemic rivalry; and the latest update on where the CAI is headed.

First of all, Michael Roth was accurate in saying that EU unity on China is needed now in large amounts. It would be a solid continuation of the unity that was on display in 2019 when Xi met with Merkel, Macron, and Juncker. It would also highlight that the new leadership in the Commission and the European Council has the legitimacy to forge a common policy on China. The EU has repeatedly said it does not want to follow in the US’ confrontational footsteps, but in order for Brussels to properly display its independent stance, it needs member states to prefer action through the EU over bilateral ties with Beijing. This isn’t just to show China that the EU speaks with one voice; it is also to convince smaller member states that they are an active part of the decision-making process, as opposed to simple recipients of a trialogue between France, Germany, and the Commission.

Secondly, there is the case of systemic rivalry. The Hong Kong national security law and the systemic oppression of Uyghurs in Xinjiang have become hot topics, and they are bound to make their way on the video conference agenda. How strongly the EU will press China on these issues, will be indicative of how important systemic rivalry will be in the EU’s China rethink. In any case, we should expect pressure on EU actors at the summit to come from the European Parliament, once again.

Thirdly, our contacts in China have indicated that the Chinese side feels it has reached a cul de sac in CAI negotiations. The EU’s decision to link the CAI to the EU-China 2025 Agenda is seen as a big hurdle in Beijing, which struggles to meet the EU’s demands or to offer sufficiently attractive concessions. The summit could provide an opportunity to shift that mindset around but it could equally spell the end of hopes for a meaningful agreement in the near future (if ever).

Screen Shot 2020-04-06 at 3.20.06 PM.png

READ MORE

 
 

5. Beidaihe - Is it on?

Every summer since 1958, the current and previous top leadership of the CCP are expected to gather for an informal conference at Beidaihe (北戴河), a coastal summer retreat in Hebei province.

► This year, the meeting would come in the context of extreme floods caused by the overflow of the Yangtze, which would only add to pressures related to US decoupling and COVID-19;

► However, this year, there is unusual silence from the current leadership, triggering questions of whether Beidaihe is still happening or whether it will have the usual significance.

Roots and Origins

The first Beidaihe Conference took place in 1958 and included among its participants Mao Zedong, Liu Shaoqi, Zhou Enlai, Deng Xiaoping, and Chen Yun.

  • At the time, the CCP Central Committee agreed on matters relating to the 1959 economic plan, as well as the existing problems in industrial and agricultural production and rural work.

  • The Beidaihe meeting has become an important annual event within Chinese politics, where strategic and personal political decisions are happening behind closed doors. This year’s Beidaihe retreat is expected to project the way forward amidst issues both domestic and external.

Context This Year

This year, China’s leads were expected to set out policies that would deal with increased international isolationism, while also countering the domestic effects of the coronavirus and massive flooding. China is currently experiencing floods as damaging as those of 1998.

  • The increased ferocity in Sino-American rivalry is bound to make its way onto the agenda, as leaders try to grapple with the economic implications of US decoupling. This was already evident in Xi’s promise in July to strengthen the domestic market.

  • On top of US decoupling, China has also become increasingly isolated abroad: relations with the EU are slowly souring, Japan announced it wants to decouple its companies from China, and India banned 59 Chinese apps after clashes at the border.

  • Domestically, China has been experiencing massive flooding, which we have not covered in detail in previous briefings, so we are giving you the run down below.

  • The Three Gorges Dam (the largest dam in the world), is nearing its capacity, as the water level of 433 rivers adjacent to the Yangtze is above the flood control line (33 of them are actually reaching record highs).

  • So, far 37 million people have been affected, including 4 million who were displaced and 158 either dead or missing. The economic cost of the floods is expected to be around 86 billion yuan (US$12.3 billion).

  • Even so, China’s flood-mitigation systems are not expected to fail completely and the economic dent is not bound to be high - only 0.17% of GDP. This is because of wetlands and infrastructure built by the government in recent years.

Is Beidaihe Happening This Year?

The Beidaihe Conference is very secretive, so it is hard to say with certainty whether it is happening, but speculation indicates that the 2020 meeting is either being cut short or may not be held at all.

  • Usually, Beidaihe’s planning involves three elements: the Hebei Secretary conducting research and inspections before the meeting; experts officially invited by the Party to Beidaihe on vacation; and the CCP top leadership being invisible for the first 2 weeks of August.

  • As of August 6, not one of the seven CCP Politburo members were reported to have appeared in public at all, which coincides with the third point but important figures were spotted elsewhere: VP Hu Chunhua was in Tibet while former paramount leader Jiang Zemin is suspected to have decided not to attend the conference at all due to the virus.

  • Speculation is also tied to public announcements made by Xi’s administration. In July, the CCP Politburo publicly announced that the CCP Central Committee will be held in October, an announcement that usually comes only after the Beidaihe Conference.

  • Furthermore, Xi presided on August 6 over a Politburo meeting that set targets for 2035 (achieve modernization) and 2050 (become a fully modernized superpower) - the details of what “modernization” entails here could be decided at the Beidahe meeting.

  • Pundits are assuming the worsening ties with the US are making Xi unenthusiastic about a meeting, but it could also be the leaders are currently meeting without having made a public announcement about it.

TAKEAWAYS

 

► ON THE LOOK OUT!
The obscure way (even more than usual) in which Beidaihe seems to be happening this year points to broader efforts by Xi Jinping to centralize decision-making - in his and his political allies’ hands. If Beidaihe is indeed happening, relations with the US are sure to be at the top of the agenda. The CAI is also likely to be of high importance, given that the CCP leadership will likely want to lay out a strategy for the videoconference with EU leaders in the fall.

We will keep monitoring what happens at Beidaihe, but if any of you have some insights, be sure to drop us a message.

Screen Shot 2020-04-06 at 3.20.06 PM.png

READ MORE

 
GS
Previous

EU-China Briefing - Holiday Notice
Next

EU-China Briefing - 3 August 2020