CRG Weekly: UK tech deal blocked and Beijing tries to boost sluggish economy
News from the China Research Group
Taiwan to play a bigger role in teaching Mandarin? In an interview with CNA, CRG Co-Chair Alicia Kearns MP expressed hope that a Taiwanese alternative to Confucius Institutes could help bolster China capabilities and understanding of Taiwan in the UK.
Podcast: China in the Caribbean. Chris Cash and Archie Brown were joined by Rasheed Griffith to discuss Chinese engagement and investment in the Caribbean. Listen here.
The stories driving the week
UK government blocks acquisition of UK electronic design firm
Business Secretary Kwasi Kwarteng issued a Final Order under the National Security and Investment Act (NSIA) to prevent the acquisition of Pulsic Ltd, a UK electronic design company involved in chip production, by Super Orange HK Holding Limited, a Chinese company.
This marks the second blocking of a Chinese takeover by the Business Department under the NSIA. Last month Beijing Infinite Vision Technology was prevented from acquiring intellectual property from the University of Manchester.
Super Orange Holdings is reportedly controlled by Shanghai Univista Industrial Software Group, a firm backed by a $50 million state-backed investment fund.
Pulsic’s intellectual property and software could facilitate the building of cutting-edge integrated circuits used in civilian and military supply chains.
With tech supply chains remaining a hot geopolitical issue, Trung Phan used Twitter to break down the critical role of ASML, a $220 billion Dutch producer of machines used to make semiconductors.
Meanwhile, Li Yin penned an article for Sixth Tone challenging the narrative of Chinese ‘forced tech transfers’ in its semiconductor industry, extolling the influence of domestic innovation.
China balances monetary easing and inflationary pressures as new economic data disappoint
Key Chinese economic data was released this week, indicating that industrial output and retail sales growth fell short of expectations in July. Property sales also tumbled as youth unemployment reached a record high of 19.9%.
In response, China cut the medium-term lending rate by 10 basis points to 2.75%. Analysts expect the People’s Bank of China to announce further easing measures next week as it walks a tightrope between supporting recovery and countering inflationary pressures.
Local governments are also expected to sell more bonds in the coming months to support their finances, which have been squeezed by lockdowns and China’s property slump.
While touring Shenzhen, Premier Li Keqiang asked six key provinces to implement pro-growth policies. Li, known for being cautious and meticulous, likened reform and opening to “blazing a trail of blood.”
Analysis from The Economist provides a more detailed look at the problems threatening China’s macroeconomy.
Meanwhile, heatwaves and drought in China’s southwest have forced factories to suspend operations until Saturday to conserve energy. This is set to hit the output of key lithium battery and solar panel producers, with Tesla warning of the supply chain impacts.
Xi and Putin reportedly attending G20 summit; China and India to join Russian joint military exercises later this month
Indonesian President Joko Widodo confirmed in an interview with Bloomberg that both Xi Jinping and Vladimir Putin will attend the G20 summit in Bali in November in person.
This visit would mark Xi’s first trip outside China since January 2020 and the first in-person meeting with US President Biden since Russia’s invasion of Ukraine.
Earlier in the week, China and India announced that they will be sending troops to Russia’s Far East to take part in the Vostok-2022 military exercise.
While Beijing has assured that its involvement in these exercises is unrelated to the Russia-Ukraine War, the announcement has significant political and symbolic implications.
US-Taiwan trade negotiations announcement as Taiwan Strait tensions continue
The US and Taiwan announced that their first round of formal trade talks will start in early autumn. The US-Taiwan Initiative on 21st-Century Trade was unveiled in June, shortly after Taiwan’s exclusion from the US-led Indo-Pacific Economic Framework.
The negotiations are reportedly aimed at building up Taiwanese economic resilience and securing supply chains between the two countries. The announcement made no mention of the broader free trade agreement sought by Taiwanese officials.
On Tuesday, the Chinese government sanctioned seven Taiwanese officials after a delegation of US lawmakers travelled to Taiwan to meet President Tsai Ing-wen and other senior government officials.
Meanwhile, The Guardian published an opinion piece from the Chinese Ambassador to the UK, Zheng Zeguang, in which he warned of serious consequences if the UK crosses China’s “red lines” on Taiwan.
UN special rapporteur report finds indications of Xinjiang forced labour
On Tuesday, the UN special rapporteur on contemporary forms of slavery published a report finding that it is “reasonable to conclude” that forced labour is taking place in Xinjiang.
The report represents one of the strongest critiques of Beijing’s activities in the region to come out of the UN but does not reflect an official UN position. Tomoya Obokata said he reached his conclusion “based on an independent assessment of available information”, including victims’ testimony, academic research and government accounts.
The highly anticipated official report from UN High Commissioner on Human Rights Michelle Bachelet on human rights conditions in Xinjiang is expected by the end of the month.
Also this week - activist groups launched a legal case over genocide and crimes against humanity being committed in Xinjiang under Argentina’s universal jurisdiction provisions, which provide Argentinian courts with jurisdiction for certain international crimes.
Weekend reads
Podcast: How companies are dealing with the Uyghur Forced Labor Prevention Act - Craig Allen and Jon Gold discuss how the act is being enforced by US customs and how companies are responding to meet its sweeping requirements on SupChina’s China Corner Office podcast.
Beyond blocs: global views on China and US-China relations - A new paper by MERICS collates a range of global perspectives on China and US-China competition to cast light on views outside of the ‘systemic rivalry framework’ adopted by Euro-Atlantic countries.
The China Trap: U.S. Foreign Policy and the Perilous Logic of Zero-Sum Competition - Writing in Foreign Affairs, Jessica Chen Weiss looks at the limitations and dangers of a US foreign policy focused on outcompeting China.