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By STUART LAU
with PHELIM KINE
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WELCOME TO CHINA WATCHER. This is Stuart Lau reporting from Brussels. Phelim Kine will be with you on Thursday from the U.S.
EU TIGHTENS ECONOMIC SECURITY
NEW YEAR, NEW TOOLS: The European Commission will announce a long-awaited package on economic security on Wednesday. If anyone tells you this whole thing is going to be “country-agnostic” and won’t target a specific country like China, they are just being nice. The variety of “white papers” that form part of the strategy come shortly after Chinese Premier Li Qiang made a last-minute plea in Davos with Commission President Ursula von der Leyen, asking her to “relax export restrictions on high-tech products to China” while promising to “import more products from the EU.”
Politicizing economics (just like Beijing did): The new package will be “Europe’s baby step” toward merging its powerful trade portfolio with an increasing focus on geopolitical tension, according to an EU diplomat. Indeed, the 27 countries are unable to come up with an immediate plan for “outbound investment screening,” which could have seen Brussels block European companies from making investments on sensitive technologies in China. Still, there’s some meat in the proposal.
EXPORT CONTROLS: The Dutch deal with the U.S. and Japan on blocking high-tech semiconductor-making exports to China may have worked well last year, but the EU now thinks there’s a need for more European — and less individual — action. “Geopolitical tensions and the pace of technological change mean there is a need for more coordinated action at EU level,” according to the draft EU document, obtained by Kathryn Carlson.
— EU wants a seat around the table: Reading between the lines, and there seems to be a sense of unease on the part of Brussels months after the Dutch-American deal was sealed. “Improved coordination of export controls at EU level would increase the ability of the EU and Member States to act effectively in a geo-political context, for example by taking the lead in defining a shared agenda with partners,” it stated.
— Way forward: The Commission will seek to adopt a recommendation by summer to “improve coordination between Member States and the Commission” on any new national control list “envisaged by a Member State before adoption,” so that “comments” on potential effects could be taken into account.
SCREENING CHINESE INVESTMENTS IN EUROPE: Europe fears that Chinese companies are taking advantage of a “fragmented regulatory framework” that currently exists across different EU countries, while “certain investments not covered by [existing regulations] could create risks for the Union's security and public order.”
— Missing: Greece and Cyprus are set to be the last two remaining EU countries still without such a mechanism, allowing Chinese and other foreign investments to enter the single market unchecked.
— Worryingly: “Among the Member States, there are substantial differences as to the scope, thresholds and criteria used to assess whether an investment is likely to negatively affect security or public order. There are also differences in the screening processes,” the EU document read, calling for the “core elements” of national screening mechanisms to be harmonized.
THE NEXT BIG THING — RESEARCH GATEKEEPING: One potentially impactful suggestion in the economic security strategy will be on research. The European Commission will call for EU-wide countries and higher education institutions to “identify and address research security risks.”
While EU-funded Horizon Europe projects have already excluded China, the EU is still concerned about non-Horizon innovations falling into the hands of Chinese entities, especially when it comes to dual-use technologies capable of defense applications. The EU plans to set up a European Center of Expertise on Research Security to “support policy learning, coordination and consistency” across the bloc.
— The difficult question: What exactly is dual use and what’s not? The EU says it’s seeking a come up with more detailed definitions, as the West grapples with an ever-complicating tech world, while seeking to avoid targeting harmless exchange of technologies as much as possible.
— Dutch approach: In the Netherlands, the government is considering legislation to screen foreign students who plan to study in technical fields for possible security risks, potentially allowing universities and government to restrict access to Dutch technology for Chinese students and companies. Reuters has more.
WHERE IS THE MONEY? According to Tobias Gehrke, senior policy fellow at the European Council on Foreign Relations, the EU needs to spell out how it will spend its cash on economic security. “Security costs money; economic security is no different. Without a serious financial commitment, EU economic security is destined to decline — more export control coordination or not,” Gehrke said. While President Emmanuel Macron called for more investments to build up France’s critical technologies, Gehrke noted that “the politics across Europe required for a more serious investment in economic security are fragile,” such as in Germany or the Netherlands.
Read here for the full story by Camille Gijs and Pieter Haeck.
UK-CHINA
CAMERON PLANS CHINA TRIP: British Foreign Secretary David Cameron hinted at a future China trip as part of his engagement effort, the Sunday Telegraph reports.
NEW POLICE UNIT: A new unit has been set up in the British police to address threats posed by China, Russia and Iran ahead of the U.K.'s general election. According to Reuters, Assistant Commissioner Matt Jukes, the U.K.'s head of counter-terrorism policing, announced on Friday that the new unit will focus on specialist investigations amid the increasing security challenges.
"I don't want to be coy. We are talking about parts of the state apparatus of Iran, China and Russia," said Jukes, further adding that the threats of hostile states are considered to be "greater now than since the days of the Cold War." He added: "We will be the most overt part of the U.K. security community stepping up its response to those hostile state actions.”
BEIJING HITS BACK: “We urge the relevant British authorities to stop manipulating anti-China politics and cease this self-directed political farce,” the Chinese embassy to the U.K. said in a statement, carried by Chinese state media Global Times.
TAIWAN UPDATES
TRUMP WON'T COMMIT TO TAIWAN'S DEFENSE: The likely Republican candidate in the November U.S. presidential election, Donald Trump, refused to commit to a U.S. defense of Taiwan in the event of a Chinese invasion attempt.
Publicly declaring his position on Taiwan's defense would put him in "very bad negotiating position" with Beijing, Trump said in a Fox News interview on Sunday. Trump laced those comments with complaints about the self-governing island's dominance of the global semiconductor supply chain. "Taiwan did take all of our chip business … they took our business away. We should have stopped them. We should have taxed them. We should have tariffed them," Trump said.
Multiple U.S. administrations have adhered to a "strategic ambiguity" policy that dictates that the U.S. refuses to specify exactly how it would respond to conflict across the Taiwan Strait. Taiwan's diplomatic outpost in Washington didn't respond to a request for comment.
BEIJING KEEPS THE PRESSURE UP: While Taiwan awaits its new presidency in May, China is threatening more punitive measures against the Democratic Progressive Party-run government.
On trade: Beijing warns that it might invalidate the whole trade pact with Taipei. The Economic Cooperation Framework Agreement, in force since 2010, should be “terminated … if the DPP doesn’t reflect upon itself,” according to state media CPPCC Daily, affiliated to the main United Front organ tasked to handle Taiwan policy.
And on pulling another ally away: Just days after Beijing masterminded Nauru’s switch from Taipei, Tuvalu is now possibly the next of Taiwan’s few diplomatic allies to ditch it. According to The Australian newspaper, Tuvalu’s Ambassador to Taiwan Bikenibeu Paeniu said “sources from Tuvalu” had told him that his country could follow Nauru. If that happens, only 11 countries will continue to recognize Taipei instead of Beijing.
TRANSLATING WASHINGTON
RAHM: CHINESE FLEEING 'AGGRESSION AND OPPRESSION': U.S. Ambassador to Japan Rahm Emanuel took a fresh shot at Beijing on Friday by linking Chinese government policies to the rising numbers of Chinese asylum seekers making the hazardous overland route to the U.S. from Latin America. "People are fleeing coercion, aggression and oppression — they’re seeking freedom, both political and economic," Emanuel says in a video clip of a speech posted to his X account on Friday with a backdrop of press headlines about Chinese asylum seekers to the U.S. Emanuel added added that freedom in the U.S. "is seductive —it has its own gravitational pull, and people will sacrifice, people will suffer to taste the fruits of it.” Emanuel is "political grandstanding," the Chinese embassy in Washington said in response. "China urges relevant people to stop making irresponsible remarks that are inconsistent with their positions," embassy spokesperson Liu Pengyu said in a statement.
CHINA COMMITTEE, TAIWAN ENVOY SLAM TIKTOK: Taiwan's new envoy to the U.S. Alexander Tah-ray Yui discussed TikTok's dangers to the island's democracy in a meeting on Thursday with the House Select Committee on China. "They emphasized manipulation by @tiktok_us in Taiwan's recent elections," the committee said in an X post, without elaborating. Neither the committee nor TikTok responded to a request for comment. Taiwan's diplomatic outpost in Washington declined to comment.
TREASURY TALKS 'FINANCIAL STABILITY' IN BEIJING: The U.S.-China Financial Working Group — one of two Treasury Department-led bilateral talk shops launched in September —wrapped up two days of meetings in Beijing on Friday. Participants discussed issues including "financial stability and capital markets issues… and countering the financing of terrorism," said a Treasury Department statement published on Friday. The meetings —at which Treasury officials "frankly raised areas of disagreement" with Chinese officials including Vice Premier He Lifeng —didn't produce any specific agreements.
He urged participants to "achieve more outcomes, and strengthen cooperation in the financial sector," China's Ambassador to the U.S., Xie Feng, said in an X post on Friday. The Biden administration's diplomatic outreach to Beijing over the summer produced Economic and Financial Working Groups under Treasury and a new working group on commercial issues and a new export control enforcement "information exchange" under the Commerce Department. But skepticism abounds about their utility amid wider tensions in the bilateral relationship.
AMBASSADOR BURNS PRAISES DIPLOMATIC OUTREACH RESULTS: The Biden administration's months of focused diplomatic outreach to Beijing has rendered substantive returns, U.S. Ambassador to China Nicholas Burns said last week. "The U.S.-China relationship has notably stabilized, there is certainly better communication between our governments than was the case eight or nine months ago," Burns said in a speech to a China General Chamber of Commerce event in New York City on Thursday. Recent bilateral commitments to improve dialogue "in a number of fields including artificial intelligence [and] counter drug cooperation," are proof of those better ties, Burns said.
MORE HEADLINES
BLOOMBERG: China is recalibrating its Latin America strategy
FINANCIAL TIMES: Steel, GDP and scepticism over China's data
FOCUS TAIWAN: Taiwan’s first transgender legislative candidate vows to continue activism
NPR: Affluent Chinese have been moving to Japan since the Covid lockdowns
WALL STREET JOURNAL: How the U.S. is derailing China's influence in Africa
MANY THANKS: To editor Christian Oliver, reporters Camille Gijs, Pieter Haeck, Kathryn Carlson and producer Seb Starcevic.
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