CRG Weekly: One year of CRG, climate talks and UK aid cuts

News from the China Research Group

Today marks one year since the China Research Group was set up. Since then, we’ve published three policy papers, seen key policy recommendations legislated, been covered in national and international newspapers, and hosted 18 events with speakers including Japan’s defence minister, Taiwan’s foreign minister and some of the world’s leading China experts. As always, if you think there’s something we could be doing better - please get in touch.

Next event: James Kynge, the Financial Times’ global China editor is joining us next Tuesday 27th April at 10am. Based in China for over 25 years, James has written extensively and presciently about the implications of China’s growing global footprint in tech, finance, and politics. The digital yuan, Beijing’s crackdown on Big Tech firms and tech decoupling are all on the agenda. Register here.

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The week in review

Biden’s climate summit with 40 leaders this week served as a useful precursor to COP26. There has been a lot of noise about climate change in recent weeks; Xi, Merkel and Macron conducted a mini climate summit of their own last week, while the UK made a new binding commitment to cut carbon emissions by 78% by 2035 compared to 1990 levels. China has committed to peaking its carbon emissions by 2030.

Source: NYT

The EU released its Indo-Pacific strategy. Like the UK, it commits to an increased maritime presence, diversification of supply chains and promotion of digital governance. But the EU is some way off from agreement on China. SCMP reported that the 27 member states failed to agree on co-ordinated measures in response to Hong Kong’s electoral reforms, allegedly because of Hungary’s veto.

On Thursday, a group of UK MPs voted to declare the ongoing situation in Xinjiang a genocide. While a non-binding declaration, it represents a major step in a long-running parliamentary campaign to pressure China over its human rights abuses. Germany and Italy are believed to have similar debates in the pipeline.

New Zealand made headlines in the UK after foreign minister Nanaia Mahuta said she was “uncomfortable with expanding the remit of the Five Eyes relationship”. While comments about the betrayal of the Five Eyes - primarily an intelligence partnership - seem overblown, New Zealand has been slightly out of step with its allies. In January this year, its government inked an expanded trade deal with China, just as Beijing’s ties with neighbouring Australia were worsening.

Australia’s relationship with China has little improved. This week, Australian Foreign Minister Marise Payne cancelled Victoria’s Belt and Road Initiative MoUs with China. Beijing has threatened retaliation. A recent new report by the Commonwealth Bank suggests Australia-China trade tensions have cost Australia $5.5bn, largely because of lower-priced coal exports, bringing the cost of defending its sovereignty sharply into focus. Good timing, then, for the news that Australia and the UK are close to agreeing a free trade agreement.

GCHQ director general Jeremy Fleming sounded the warning over China’s cyber threat to world in a rare speech on Friday. "The conversation about 5G was really lost a decade ago, when Western nations decided that they weren't going to invest in the underpinning infrastructures... and the result was we just didn't have the choices.” This week, the UK also announced controversial cuts to overseas aid, cutting spending from £14.5bn to £10bn. As some have observed, this may leave a gap for China to move in with its Belt and Road Initiative as the UK retreats.

It is worth reflecting on how quickly the Belt and Road has risen up the policy agenda over the past year. In recent weeks, the EU and India announced collaboration on connectivity and infrastructure, while Johnson and Biden are said to have discussed a Western alternative. The China-focused Strategic Competition Act, currently heading through Congress in the US, includes big spending pledges for developing countries. Taking a step back, an effective response to the BRI will require a laser-focused understanding of exactly what developing countries find appealing about China’s offerings (see our recent policy paper on the Belt and Road for more on this theme).

And while accusations of deliberate debt-trap diplomacy are largely unproven, there is strong evidence emerging about the secrecy of China’s sovereign lending contracts. A landmark paper How China Lends, published last month by the Center for Global Development, analysed 100 contracts and found unusual confidentiality clauses and prioritisation clauses, confirming on-the-ground reports about Chinese lending practices. As Elizabeth Economy commented in our event last week, there is significant scope for democracies to pressure China over the transparency of its lending and environmental commitments on the BRI.

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China and English football

Foreign ownership of English football clubs is back on the political agenda after the European Super League collapsed. How involved is China?

Xi Jinping loves football, and his plans to turn China into a footballing superpower kicked off a wave of Chinese investment in English football in 2015. It proved short-lived. Few had any significant success, and by 2018, Chinese government regulators had clamped down on wasteful overseas acquisitions of sports clubs. Shortly afterwards, Chinese investors sold out of several European football clubs, including Aston Villa and Northampton Town. Beijing directed investment towards the more controllable domestic football market. Tony Xia, former owner of Aston Villa, was later detained for six months by Chinese authorities before being arrested in January this year over “harming” the interests of a manufacturing firm.

Any changes to club ownership laws in the UK would affect some Chinese investors. Manchester City may be the only big club with minority investment from China. But lower down the football pyramid, Chinese investors are still majority-involved in several English clubs. Fosun still owns Wolves after its acquisition in 2016, Gao Jisheng is the majority shareholder at Southampton and Chinese billionaire Guochuan Lai still holds a majority stake in West Bromwich Albion. In the Championship, Birmingham City and Reading are backed by Chinese owners. Wigan Athletic went into administration four weeks after a Hong Kong-based consortium took over last year.

Another crucial relationship is China’s role as the Premier League’s most lucrative overseas television rights territory. A 3-year £564m deal with PPTV to screen the Premier League in China collapsed after the pandemic, and was replaced with a new stopgap broadcast deal with Tencent Sports. PPTV refused to air an Arsenal match in 2019 after star player Mesut Ozil criticised China over its treatment of the Uyghurs.

More: The FT in 2018 explains why Chinese investors took route one out of European football.

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Weekend reads

Perhaps the most compelling long read yet on the rise and fall of Jack Ma in the FT.

Do China’s intellectual elite support the government? An insightful podcast from Cindy Yu’s Chinese Whispers podcast.

China’s domestic surveillance programmes benefit foreign spies. An aversion to encryption makes the country’s networks vulnerable, notes The Economist.

Beijing’s tech ambitions: what exactly does it want? The Chinese government has to prioritise one of self-reliance, fundamental breakthroughs, and economic upgrading in Macro Polo.

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