Weekly China Briefing 2015.5.11

Key movements on Chinese economy, politics, and society.

Dragon dances…

…with the eagle: losing trust at a time when it is needed the most

  • A chorus of China experts sounded alarm over the deterioration of US-China relations. Orville Schell of Asia Society worried that the American interests group that is pro-China has largely disappeared, and that China remained seemingly undisturbed by the fact.
  • Kevin Rudd, former Australian premier and now the head of Asia Society Policy Institute, called for “constructive realism” between US and China. Rudd also suggested “pan-continental infrastructure agenda” as a better English translation for the awkward “One Belt One Road.”
  • David Lampton, a top China watcher, warned that “a tipping-point in US-China relations is upon us.” “If developments continue along the current trajectory, both countries will have progressively less security, at higher cost; the world will enjoy less cooperation on transnational issues requiring joint Sino-American efforts… What can be done? Fundamentally, America has to rethink its objective of primacy and China must recalibrate its own sense of strength and what that entitles it to.”
  • Hank Paulson observed that “the consensus is collapsing in the US that China’s rise is good for America.” For the sake of future generations, Paulson said, US and China should embrace healthy competition, promote win-win economic opportunities, and collaborate on global challenges such as climate change.

… with the bear: an uneasy lovefest

  • China and Russia put on an all-out lovefest, as President Xi (the only major world leader present) joined Putin in Moscow at the 70th Anniversary of defeating Nazi. Since the imposition of Western sanctions, official Russian voices have promoted China as a country that can provide access to investment and markets but also shares Russia’s values and recognizes its regional interests. China and Russian also conducted their first joint naval drill in the Mediterranean Sea, showing determination to further strengthen military ties amid potential international conflicts.
  • The two presidents signed 32 bilateral agreements (including $6 billion Chinese investment in a Russian intercity rail line, and an cyberspace “nonaggression pact”). Notably absent from the agreements was a compromise on a price for gas to be sold by Russia to China through a new, multibillion-dollar pipeline.
  • But undercurrents of mutual suspicion run deep. A persistent anti-Russian sentiment among some Chinese stems from the indignation and humiliation over the memory of Qing Dynasty’s defeat by Czarist Russia, and the surrender of massive area over a century ago. Russian media also fretted about Russia’s over-reliance in China, and the risk of becoming China’s sidekick in Asian affairs.

… with the elephant: courteous and promising

  • Amid rising geopolitical competition, India’s Modi started his first trip to China as the premier with a burst of sightseeing (Terracotta warriors in the historic Silk Road city of Xian) to highlight the ancient cultural (Buddhism) ties between the two civilization. Meanwhile, scholars from both countries bemoaned the shockingly low mutual interests, knowledge and regard between the two most populous nations (collectively representing more than one third of humanity.)
  • The leaders from both countries sought a fine balance between setting a constructive and courteous tone and raising real grievances (especially for India). Modi emphasized that common interests outweigh disagreements, and that China has openness to “reconsider its approach to managing conflicts” and “rethink policies that had hindered cooperation.” The sources of contention between the two countries have included long-running border disputes, a heavy trade imbalance in China’s favor and India’s wariness toward China’s partnership with Pakistan.

On addictions

  • China is trying to wean itself from GDP addiction by setting environmental red lines. The cabinet said government officials will face “life-time accountability” for environmental destruction happened during their term in a region. This practice will help alleviate the “moral hazard” where an official’s evaluation is based on his GDP performance, leaving ecological disasters in the wake of his promotion to elsewhere in the country. Local governments at all levels now faced a “red line”, which meant they would need to ensure that there was no further deterioration in the quality of air, water and soil in their respective regions.
  • China’s addition on imported oil worsens as it overtook the US as the world’s biggest importer of crude oil in April, the culmination of a seismic shift in global energy flows over the past decade. US shale revolution has cut the country’s reliance on oil from overseas — and how China’s demand has grown even as its economy slows.
  • The number of drug users in China was estimated at more than 14 million as of the end of 2014, accounting for over 1% of China’s total population.