Chinese markets react to Xi's third term

Chinese markets react to Xi’s third term

welcome to Foreign Police‘s China Brief.

Highlights this week: Chinese stocks fall as cautious investors react to Party Congress, how latest lab leak story Chinese official documents misinterpreted, and why the British Prime Minister Rishi Sunak will maintain a tough stance on China.

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welcome to Foreign Police‘s China Brief.

Highlights this week: Chinese stocks fall as cautious investors react to Party Congress, how latest lab leak story Chinese official documents misinterpreted, and why the British Prime Minister Rishi Sunak will maintain a tough stance on China.

If you would like to receive China Brief in your inbox every Wednesday, please sign up here.

Chinese stocks fall after party congress

Chinese markets slumped after the 20th National Congress of the Communist Party of China (CPC) ended last week, and the yuan hit its lowest level in 14 years. Investors reacted cautiously to Chinese President Xi Jinping’s third term announcement, as well as the emphasis on security over economic growth in Xi’s speeches and the exclusion of senior figures from power in favor of economic reform.

Chinese stocks rallied on Tuesday based solely on an unsubstantiated rumor circulating on social media that a committee had been set up to examine how China could end its zero-COVID policy, with a date. supposed target of March 2023. There is no evidence of such a committee; Foreign Ministry spokesman Zhao Lijian denied knowledge of its existence, ultimately dampening the stock market rally. But traders are despairing of any hope of reopening.

The CCP’s top leadership is likely trying to find a way to relax the zero COVID policy, but that will depend on Xi’s willingness to do so. Ending the policy is a classic example of a thorny problem: information is incomplete, circumstances change, and any supposed solution risks creating new challenges. Although China has made great efforts to reach its remaining unvaccinated population, the potential for the uncontrolled spread of COVID-19 among 1.3 billion people is overwhelming, especially given the relative underperformance of Chinese vaccines.

On top of that, China’s healthcare system is already under strain as many resources have been devoted to controlling COVID-19, causing a shortage of medical personnel and disrupting the pharmaceutical supply chain. Readjusting to a policy that emphasizes treatment rather than containment would be a major effort. Chinese officials are also under even more intense pressure to show ideological and personal loyalty, and their tendency is to maintain the status quo, not because it is good, but because the alternatives could be worse.

Moreover, China is still grappling with new outbreaks and resulting lockdowns. City officials have imposed waves of new restrictions but avoided calling them lockdowns, thanks in part to the Shanghai fiasco earlier this year. The number of cases in China is still tiny compared to most countries, but outbreaks like the one in Guangzhou, now recording more than 100 cases a day, have officials worried.

A chasm has opened up between rural people, who are generally less restricted and still politically friendly, and city dwellers, who are increasingly angry and resentful. As has been the case since the start of the pandemic, migrant workers โ€“ already marginalized and irregularly housed โ€“ are among the groups most affected by lockdowns and other restrictions, which can eliminate their regular income. An outbreak last week at a Foxconn iPhone factory in Zhengzhou led workers to flee for fear of being trapped in quarantine.

A guaranteed income for people in quarantine could alleviate this problem. Most of the aid has gone to businesses, and while local governments have offered help to individuals during lockdowns, it has often flowed through existing welfare systems that don’t cover migrant workers. The central government should assume this responsibility, given the dire state of local government finances.

The Chinese stock market should not push China to end its zero COVID policy. It represents a small part of the country’s economy – and is manipulated by the government – and as a result has underperformed China’s economic growth in recent decades. But the rest of the picture now isn’t much better. October home sales by top developers were down 28% from a year ago. Prices have only fallen slightly, but no one is buying and the coming crisis continues to worsen.

As Zongyuan Zoe Liu writes in Foreign Police, the zero-COVID policy could be the least of China’s long-term economic problems. In the short term, political pressure and impending winter mean reopening is months away, at best.

The story of the lab escape fails. Last week, US Senate Republicans released a report pushing the idea that COVID-19 came from a lab leak, pointing to the Wuhan Institute of Virology, but it offered little new information to back it up. that. A ProPublic-vanity lounge The collaboration released on Friday headlined the Senate report and claimed it offered new evidence, but was found to be based at least in part on poor translation and misinterpretation.

Biosafety experts have criticized the ProPublica-vanity lounge story like misunderstanding routine work, but it is also an exercise in the dangers of misreading Chinese material. The article is based almost entirely on the account of Toy Reid, a US State Department policy official; Reid says he can read “gone talking” that “[e]even a native Mandarin speaker “can’t quite keep up”.

While there is an art to reading between the lines in Chinese political language, it is not impossible and is a very common skill among native speakers. The key document cited is an article in a bulletin published by the branch of the Chinese Communist Party at the lab – effectively the equivalent of a company bulletin, not a “memo” or “report” as described in the article. (You can read the whole thing here.) Additionally, Reid misrepresents the content of the newsletter, turning a piece of bloat into evidence of grim failures.

For example, the article says, “Even at the BSL-4 lab, they repeatedly lamented the problem of the three no’s: no equipment and technology standards, no design and construction teams, and no operating or maintenance experience. [a lab of this caliber].โ€

But that’s a misleading version of the original lines: “At the start of construction, the P4 lab in Wuhan faced the dilemma of the three no’s: no equipment or technical standards, no design or construction teams, and no experience in operation and maintenance… but with party members from the Zhengdian laboratory party branch leading the charge and bravely pushing forward, [the lab] got all three yeses: a mature/well-developed set of standards, a seasoned operations and maintenance team, and invaluable construction experience. ยป

The ProPublica-vanity lounge history also relates that the use of sin (written instructions or comments) indicates that Xi and Chinese Premier Li Keqiang took particular interest in the Wuhan lab in November 2019. It only takes a little research to find that other security documents issued by local authorities regularly use the same language about sinlike this warning issued in March 2019 by an office in Shenzhen about an incident in the remote province of Jiangsu.

Semafor reported that the extent of immediate proofreading by native speakers and professional translators prompted ProPublica to contact translators to verify the material the day after the article was released. Unfortunately, given how politicized the origin of COVID-19 has become, we can expect more of this in the future.

Loopholes in semiconductors. The new restrictions on U.S. involvement in Chinese semiconductor manufacturing do not appear to be as comprehensive as the industry initially feared. Rather than prohibiting all U.S. individuals from getting involved, the rules focus only on U.S. personnel in specific roles. But the new restrictions join existing export controls, adding more difficulty for Chinese companies who must now contact US officials directly or risk being blacklisted.

These moves appear to be the first shots in a new phase of the technology and trade struggle between the United States and China that could potentially involve their allies. US Vice President Kamala Harris was recently in Japan trying to convince Tokyo.

On FP Live this week, Jon Batemansenior researcher in the Technology and International Affairs program at the Carnegie Endowment for International Peace, spoke with FP editor Ravi Agrawal about Washington’s bold plan to restrict imports of semiconductors from Beijing.

The UK remains firm on China. When former British Prime Minister Liz Truss resigned after about six weeks in office, officials in Beijing may have breathed a sigh of relief. But her successor, Rishi Sunak, has taken up her hardline approach, although she was seen as a relatively pro-China figure primarily interested in trade deals rather than human rights issues. Now, as prime minister, Sunak says he aims to ban Confucius Institutes United Kingdom.

Sunak took a considerably more hawkish approach during his losing leadership bid against Truss earlier this year, seeking to avoid accusations of being soft on Beijing. He hasn’t changed his mind much, but Britain’s Conservative Party is deeply divided after successive leadership changes, and Sunak needs all the support he can get, including from the harshly anti-Beijing group of politicians. characterized by the new Minister of Security, Tom. Tugendhat.

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