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China Watcher: Italy’s China question — Greece bends — Anti-spy law fear grows


May 2, 2023

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WELCOME TO CHINA WATCHER. This Tuesday we’ll take you on a canter through Rome, Delphi and Buckingham Palace, with your European tour guide Stuart Lau. My D.C.-based colleague Phelim Kine will be with you on Thursday.


WHAT WILL SHE TELL BIDEN? Italy’s Prime Minister Giorgia Meloni will soon face one of her most potentially economically costly foreign policy choices, only seven months into the job. She’s widely expected to decide whether to terminate an agreement on Beijing’s Belt and Road Initiative, signed in 2019. While technically the EU’s third largest economy has until the end of the year to let Beijing know what it thinks about the giant infrastructure (and influence) projects, senior officials from both sides of the Atlantic are now expecting Meloni to signal which way Rome will go by the time she attends the G7 summit in Hiroshima with U.S. President Joe Biden, in less than three weeks.

Uscita! Exiting the memorandum of understanding is politically desirable for the right-wing prime minister, who’s keen to prove herself a trusted Euro-Atlantic ally. After all, Italy is the only G7 country to have acceded to China’s program since 2019, at a time when purchasing strategic assets like Mediterranean ports would be deemed less problematic. However, leaving the Belt and Road also brings economic uncertainty, given Beijing’s almost-certain displeasure and possible retaliatory actions.

“As far as I know, they [the Italian government] want to terminate it … The intention is to try and terminate it,” Nathalie Tocci, director of the Istituto Affari Internazionali, told China Watcher. “And as far as I know, Beijing has been not particularly subtle, communicating what kind of retribution basically would await.” So far, Rome hasn’t made a final decision, she stressed.

Relationship — it’s complicated: Back in 2019, when the MOU was clinched between Chinese President Xi Jinping and Meloni’s predecessor Giuseppe Conte, it stipulated an automatic renewal, getting rid of the need for renegotiation and making it more politically sensitive for Rome to quit. Tocci added: “I don’t know whether in the end, they’re just going to bend and break over this, or whether they will succeed in standing firm and actually ending the agreement. It’s not as easy as it sounds, because of the idiotic way in which the agreement was conceived.”

ITALY STILL WANTS BUSINESS: The last time they met in November on the margins of G20 summit in Bali, Indonesia, Meloni told Xi that her government had an “interest in promoting mutual economic interests, also with a view to increasing Italian exports to China.”

At that meeting, Xi didn’t bring up Belt and Road — a curious omission that didn’t repeat itself when China’s top diplomat Wang Yi met Italian President Sergio Mattarella three months ago.


CENTER OF THE WORLD YIELDS TO CHINESE PRESSURE: Greece has just shown us how not to handle Taiwan unprepared. The presence of Taiwanese ex-president Ma Ying-jeou at the annual Delphi Economic Forum in Greece last week — named after a town considered by ancient Greeks to be the navel of the world (omphalos) — caused quite a diplomatic storm, our Athens correspondent Nektaria Stamouli writes in to report.

President, not president… then president of something else: An initial plan by the organizers to refer to Ma as former Taiwanese president was scrapped, after the Chinese embassy expressed its strong opposition, officials with knowledge of the event’s planning told Nektaria on condition of anonymity. They then called him former leader of Taipei, before twisting it further by calling him “former President of the Kuomintang party — Chinese Taipei.” At this point, Taiwan’s foreign ministry asked Ma to reconsider his appearance, but Ma decided to go nonetheless.

Eventually his panel discussion took place with moderator Professor Cheng Li addressing him as former president of Taiwan onstage. Still, issues continue, with some noticing that the event’s livestream recording has been altered to exclude Ma’s speech. The press release issued later by the organizers addressed Ma as the former president of Taiwan.

So what did Ma say? At the forum, Ma — whose party takes a friendlier line on China than the current president’s — was adamant that Beijing wasn’t ready to attack Taiwan. “They are not ready to reach that point … Taiwan has been a democratic society for years. The people of Taiwan will not accept anything other than a peaceful settlement.”

Still, Ma, who just finished an historic trip to mainland China last month, gave off a sense of pessimism about the way forward. A peaceful solution in Taiwan, he said, “is not impossible, but it is difficult.” It remains to be seen “whether Taiwan’s ruling party will implement what is necessary,” Ma said, adding: “Otherwise there may be a rupture or even war with China.”

BEIJING REP SPEAKS: China’s Ambassador to Greece Xiao Junzheng also took part at the forum and sent a message to the U.S. not to try to hinder China’s development, using a quote from Diogenes to Alexander the Great. “Stand aside, you are blocking my sun”.


CORONATION DRAMA: China is expected to send Vice President Han Zheng to attend the coronation ceremony of King Charles III this Saturday, as POLITICO’s Eleni Courea scooped last week. The China hawks’ fury didn’t stop there with Han being the top Communist official in charge of Hong Kong affairs during the height of police suppression of the pro-democracy movement in 2019.

Invitation: British Foreign Secretary James Cleverly is expected to say yes to the Chinese delegation’s invitation for him to visit China, the Times reported. Iain Duncan Smith, the ruling Conservative Party’s foremost China hawk, criticized the government, likening its move to appeasement with Nazi Germany. “I cease to wonder about the lengths the U.K. government goes to try and show how Neville Chamberlain was right in 1938,” he told the newspaper.

NEW CHINA-FOCUS THINK TANK: The China Strategic Risks Institute (CSRI), set to launch on May 10 at an event in the U.K. House of Lords, aims to focus the debate on China around the risks and opportunities of its global rise, and away from the split between China hawks and Golden Era supporters, its Deputy Director Andrew Yeh said.

The China space is getting crowded: The recent years have seen a variety of advocacy groups mushrooming in Britain. But Yeh said CSRI will aim to focus on producing research and briefings. “We feel that in the U.K., the U.S. and the West more broadly, the debate on China has become quite polarized. We think the risk framework allows us to frame the debate in a way that avoids polarization,” he told POLITICO’s Cristina Gallardo.


SULLIVAN SLAMS CHINA’S SUBSIDIES: U.S. National Security Adviser Jake Sullivan criticized Beijing’s provision of subsidies to export-focused industrial sectors as an ongoing source of friction in the U.S.-China trade relationship. State subsidies continue “at a massive scale, both traditional industrial sectors like steel, as well as key industries of the future, like clean energy, digital infrastructure and advanced biotechnologies,” Sullivan said in a speech on Thursday at the Brookings Institution. The U.S. government has criticized such subsidies as one of Beijing’s “unfair trading practices” that have triggered U.S. tariffs on Chinese products valued at $380 billion annually. But Sullivan said the Biden administration wants to maintain economic ties to China. “We are for de-risking and diversifying, not decoupling,” Sullivan said.

FBI: UNLAWFUL CHINESE POLICE OUTPOST ‘OUTRAGEOUS’: FBI Director Christopher Wray took Beijing to task for the unlawful Chinese police outpost recently uncovered in New York City. “It’s frankly outrageous that the Chinese government would think that it could set up shop here on our soil and conduct uncoordinated unsanctioned illegal law enforcement operations,” Wray told a House Appropriations subcommittee hearing on Thursday. The Department of Justice’s indicted two Chinese citizens last month for using the Manhattan facility to go after dissidents. Those indictments constitute “politicizing and weaponizing legal instruments,” Chinese Foreign Ministry spokesperson Mao Ning said on Thursday.

DEFENSE CONTRACTORS CONVERGE ON TAIPEI: Taiwan will host a delegation of 25 U.S. defense contractors at the Taiwan-U.S. Defense Industry Forum on Wednesday. The contractors will include including “suicide drone” manufacturer AeroVironment, Taiwan’s state news agency reported on Thursday.

MORE NAVY ACTION IN TAIWAN STRAIT: A U.S. Navy P-8A maritime patrol craft transited the Taiwan Strait on Friday. And the U.S. 7th Fleet wants Beijing to get used to it. “The United States will continue to fly, sail, and operate anywhere international law allows including within the Taiwan Strait,” the 7th Fleet said in a statement. That transit “proved that the U.S. is a saboteur of peace and stability as well as a creator of security risks in the Taiwan Strait,” People’s Liberation Army spokesperson Senior Colonel Shi Yi said in a statement.


ANTI-SPY LAW CONCERN GROWS: Beijing’s new Counter Espionage Law is causing widespread concern among the foreign business community. The law, according to the U.S. Chamber of Commerce, “dramatically increases the uncertainties and risks of doing business in the People’s Republic,” it said in a statement on Friday. Jerome Cohen, a China law expert at New York University, said the proposed amendments to the espionage law “add to the already breathtaking breadth of its provisions,” as per the Guardian.

Crux of the matter: Foreign businesses fret about the new law, which is expanded from “state secrets” to “documents, data, materials or items relating to national security.”

Exhibit A: That warning follows a police raid last month on the Beijing office of U.S. consulting firm Bain & Company and Chinese authorities’ move last month to detain five local staff of the corporate due diligence firm Mintz Group and forced the closure of its Beijing office.

“Foreign investment will not feel welcomed in an environment where … legal uncertainties are on the rise,” the U.S. chamber said.

Capitol Hill is paying attention. “Our business leaders need to take off their golden blindfolds and recognize that the recent police raids of American companies Bain and Mintz are not one-offs, but part of a long, proud tradition of exploitation,” said Mike Gallagher (R-Wis.), chair of the House Select Committee on China in a statement on Thursday.


MARCOS-BIDEN DEFENSE DEALS TARGET CHINA: Philippine President Ferdinand “Bongbong” Romualdez Marcos is going back home to Manila following his White House visit with President Biden on Monday with a package of defense agreements amid growing tensions with Beijing in the South China Sea. The two countries have agreed to “a new set of bilateral defense guidelines that will deepen our alliance cooperation and interoperability across operational domains, including land, sea, air, space, and cyberspace,” said a senior administration official who briefed reporters on condition of anonymity. The Biden administration will also provide the Philippine military several C-130 aircraft and “a number of Cyclone-class coastal patrol vessels” to bolster Manila’s coastal defense capacity, the official said.

Course (near) collision: The Foreign Affairs Department in Manila lashed out on Friday at “highly dangerous manoeuvres” by a Chinese coast guard vessel that almost caused a collision between a Philippine vessel in disputed waters last week. That incident was a “premeditated provocation designed to deliberately create a friction” between the two countries, Chinese Foreign Ministry spokesperson Mao Ning said on Friday. The State Department called it “a stark reminder of PRC harassment and intimidation of Philippine vessels” in a statement on Saturday. These tensions have helped make Marcos “one of the most pro-American Philippine presidents we’ve seen, if not the most,” said Derek Grossman, senior defense analyst at the RAND Corporation.

INDIA-CHINA MEET: Indian Defense Minister Rajnath Singh didn’t mince words in his first meeting with his Chinese counterpart since September 2020, a period marked by mutual distrust over the border disputes along the Himalayas. Singh “categorically conveyed that development of relations between India and China is premised on prevalence of peace and tranquillity at the borders”, the Indian ministry said in a statement. “He reiterated that violation of existing agreements has eroded the entire basis of bilateral relations.” Reuters has the story.

AUKUS GETS NEW FAN: Singapore has given its support to Australia’s decision to join the U.S. and U.K. to develop nuclear-powered submarines — putting itself at odds with Chinese opposition. The Guardian has more


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