CRG Weekly: Xi in Hong Kong and NATO strategy shift on China
News from the China Research Group
Podcast: China’s digital yuan. Chris Cash was joined by the Atlantic Council’s Ananya Kumar to discuss China’s digital yuan and whether it will aid Beijing’s efforts to internationalise its currency and reduce dependence on dollar-denominated transactions. Listen here.
The stories driving the week
Xi Jinping arrives in Hong Kong to mark 25th anniversary of handover
The 1st July marks the 25th anniversary of the handover of Hong Kong. Speaking at an event to commemorate the anniversary, Xi said the “one country, two systems” had protected Hong Kong's prosperity and stability as well as China's "fundamental interests" in the past 25 years.
The ceremony also saw hardliner John Lee sworn-in as Hong Kong’s new chief executive. As security chief, Mr Lee played a major role in the crackdown on Hong Kong’s 2019 protests.
Xi's visit was his first to Hong Kong since the 20th anniversary celebrations in 2017 and his first visit outside the mainland in two years.
Boris Johnson said the UK is “doing all we can to hold China to its commitments so that Hong Kong is once again run by the people of Hong Kong, for the people of Hong Kong."
NATO includes China in Strategic Concept for the first time
In its new strategy blueprint, or Strategic Concept, NATO said tackling “systemic challenges posed by the People’s Republic of China to Euro-Atlantic security” and the “deepening strategic partnership” between China and Russia would now be among its main priorities.
The alliance’s last Strategic Concept was agreed to in 2010 and did not mention China at all.
British Foreign Secretary Liz Truss said at the summit in Madrid: “with China extending its influence through economic coercion and building a capable military there is a real risk of a catastrophic miscalculation such as invading Taiwan”. Earlier in the week, Truss had urged Western nations to do more to ensure Taiwan can defend itself against China.
Beijing issued a strong rebuke to the unveiling of the blueprint, with China’s mission to the EU calling out what it said was “cold war thinking and ideological bias.”
Writing in The Times, Simon Nixon called for a renewed push for an economic NATO to allow the West to set de facto global standards as a means to expanding global trade.
New initiatives unveiled at G7 summit
Leaders of the G7 held three days of talks in Germany's Bavarian Alps with Russia's invasion of Ukraine dominating the agenda.
The world's wealthiest democracies also unveiled the Partnership for Global Infrastructure and Investment (PGII), through which leaders plan to mobilise $600bn in funding for the developing world in a move seen as a counter to China's Belt and Road plan.
The US has promised to raise $200bn of the total through grants, federal funds and private investment, while the EU has announced a further 300bn euros.
China’s Director for European Affairs, Wang Lutong, praised the new G7 initiative, stressing that there were still big gaps in development funding across the Global South that have to be solved through cooperation.
The summit also saw the US, UK, Australia, New Zealand and Japan launch the Blue Pacific Partnership, an informal mechanism to assist Pacific Island countries in addressing challenges including climate change and security, as concerns about Chinese influence in the region grow.
China eases Covid restrictions for arrivals from abroad
China has halved its required quarantine period for international arrivals, bringing the country’s policies in line with those in Hong Kong.
The ‘7+3’ policy (three days at a centralised facility, before three additional days at home) is seen as a significant adjustment to "dynamic zero-Covid" to better balance anti-epidemic work with much-needed economic growth.
China’s economy showed signs of rebounding following a lockdown-induced economic shock and extended tech sector crackdown. The CSI 300 index of Shanghai- and Shenzhen-listed stocks climbed more than 8 per cent in June and new data revealed that China's factory activity expanded for the first time in four months.
However, President Xi Jinping reaffirmed the country's "zero-Covid" policy during a symbolic inspection tour to Wuhan in which he cast the strategy as proof of the superiority of the country’s political system.
Weekend reads
Matt Pottinger on flipping the US-China paradigm on its head. The former US deputy national security advisor talks The Wire about the reality of the Chinese Communist Party's ambitions, the value of concrete actions vs. rhetoric, and his perception of Xi’s relationship with Trump.
The Hong Kong ‘unofficials’ who advised Britain on the handover – and were ignored. To mark the 25th anniversary of Hong Kong’s handover, The Guardian’s Vincent Ni and Jason Rodrigues explore the plight of a group of local advisers who tried to ensure the interests of Hongkongers would be protected after 1997.
Semiconductors in the UK. Sir Geoffrey Owen, Head of Industrial Policy at Policy Exchange, explores the question of whether should the UK have a strategy for semiconductors in this new paper.