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Hi, China Watchers. Today we look at Beijing's looming presence over President Donald Trump's summit with Indian Prime Minister Narendra Modi, examine Europeans' thoughts on China's rise and profile a book about the corporate power of China's state firms.
Let's get to it. — Phelim.
Trade and "Chinese aggression" on the Trump-Modi summit agenda
U.S. President Donald Trump and Indian Prime Minister Narendra Modi. | Saul Loeb/AFP via Getty Images |
President Donald Trump and Indian Prime Minister Narendra Modi will be eyeing Beijing as they meet today to hash out disputes over trade and immigration that may test the two leaders' warm relationship.
The king and I. Modi and Trump forged close ties in the first Trump administration, even though Trump accused India of being a "tariff king" in 2018. At a gala a year later, Trump declared the Indian prime minister one of America's "most devoted, and most loyal friends." On at least two occasions the two leaders greeted each other with bear hugs rather than a diplomatic handshake.
But, like with many U.S. allies and adversaries alike these days, trade tensions could dominate their talks and create friction.
Tariff talk. Trump is likely to press Modi to deliver on issues raised in their call last month — to import more U.S. products and buy more U.S. defense equipment. Modi may try to dodge Trump's threat of "reciprocal tariffs" that will match the U.S. tariff rate with those of importers by announcing a raft of tariff reductions on U.S. products ranging including chemicals and electronics, per Reuters. Modi may also want Trump to ensure that deportations of Indian citizens don't needlessly humiliate them. Images of Indian citizens shackled in a U.S. military plane deportation flight last week outraged Modi's nationalist constituency back home.
The Indo-Pacific factor. China — with which India shares a long and troubled border — sits alongside that agenda of hot button domestic issues. Beijing's increasingly assertive footprint in the Indo-Pacific "is an underpinning theme to this meeting," said Lisa Curtis, former national security council senior director for South and Central Asia in the first Trump administration. A successful summit can help solidify India's emerging role in "competing with China and pushing back against Chinese aggression," Curtis added.
China policy please. But Modi may first need clarity from Trump about his China policy. Trump has sown confusion in New Delhi by hitting Beijing with a (relatively) modest 10 percent tariff this month after threatening levies as high as 60 percent. Modi may also wonder whether Trump's routine public praise for China's leader Xi Jinping (Trump said he "loves talking" with Xi in an interview Sunday) signals the U.S. president is now more dove than hawk.
The fact that U.S. policy on China "sort of goes up and down and waxes and wanes," is problematic for India, said Arun Singh, a former Indian ambassador to the U.S. and now a fellow at the Carnegie Endowment for International Peace.
Quad dreams. The two leaders will likely also discuss the future of the Quad group —which links the U.S., India, Japan and Australia. The Quad foreign ministers' meeting earlier this month suggested moves toward a more regional security-oriented focus aimed to offset China's rapidly expanding military heft. There are ambitions on Capitol Hill for so much more. "This is where India comes in handy — we can sell them arms and marry up with them and say, 'Look, if you’re attacked, we’re attacked,' same thing we do with NATO," said Rep. Rich McCormick (R-Ga.) co-chair of the House India Caucus. That's a long shot. The Quad's current focus on collaboration in areas such as climate, health and infrastructure development gives India "plausible deniability that it is a securitized alliance" that Modi is unlikely to give up anytime soon, said Manjari Chatterjee Miller, senior fellow at the Council on Foreign Relations and an expert on India-China relations.
BRACE FOR BEIJING TRADE RETALIATION
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Democratic lawmakers are warning that China's response to a looming trade war with the U.S. could batter the U.S. agricultural sector.
Beijing's triple punch of countermeasures to Trump's 10 percent tariff on Chinese imports imposed earlier this month took effect on Monday. They included 10 percent and 15 percent tariffs on selected U.S. products, export controls on rare metal exports and an anti-monopoly investigation into Google.
But House Select Committee on China ranking member Raja Krishnamoorthi (D-Ill.) and House Agriculture Committee vice ranking member Shontel Brown (D-Ohio) warn the worst is yet to come if Beijing imposes high tariffs on U.S. farm exports.
"Small farmers may be forced to shut down business. Local ranchers may have to seek unemployment. We owe it to American farmers and ranchers to be ready for all scenarios," the two lawmakers said in a letter to Acting Secretary of Agriculture Gary Washington released Wednesday.
Krishnamoorthi and Brown want "contingency plans to respond to PRC agricultural retaliation" before it hits. And that will require coordination with "allies, partners, and other nations that have robust agricultural trade flows," the lawmakers said.
Concerns about Beijing's expanded ability to retaliate in a potentially worsening trade conflict are shared among corporate America.
"China has done its homework to understand how to inflict disproportionate pain on the U.S. I suspect China has got plenty of things up its sleeve that it could do" in response to U.S. trade actions, said Sean Stein, who took over as president of the U.S.-China Business Council corporate advocacy group in November. He added that Beijing has "built the tools … and they are a lot less vulnerable to U.S. trade actions than they were in 2017."
DEMOCRACY GROUP IN CROSSHAIRS
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The National Endowment for Democracy is one of Elon Musk's latest targets, and that's creating an awkward situation for Republicans that have long backed the group, your host reports in a story out this morning.
Musk has ranted against the group — which promotes democracy overseas — and it has lost access to its funding from the Treasury Department. Organizations it supports including the International Republican Institute have begun laying off staff. Still, prominent Republicans with ties to NED mostly declined to comment on the situation.
The funding halts could affect dozens of nonprofit organizations in the U.S., China, Taiwan and Hong Kong whose operations depend on a portion of NED's annual $14 million in China-focused funding. They include the China Digital Times, an online platform for uncensored Chinese media content and the Campaign for Uyghurs.
Those groups could struggle to find alternate funding from philanthropic or corporate sponsors if NED goes under, said Maya Wang, associate director for China at the nonprofit Human Rights Watch.
"Companies or wealthy people don’t want to fund anything that has to do with promoting human rights and democracy in China, because everybody has some kind of business relationship with China," Wang argued.
TRANSLATING WASHINGTON
— HEGSETH PRIORITIZES DETERRING CHINA OVER UKRAINE: Secretary of Defense Pete Hegseth is signaling that the Trump administration will redirect resources away from helping Ukraine try to retake territory controlled by Russia and channel them to the Indo-Pacific. Restoring Ukraine's pre-Russian invasion borders is "an unrealistic objective," Hegseth told the Ukraine Defense Contact Group — a collection of 50 nations who gather monthly to plan military support for Ukraine — in Brussels on Wednesday. Hegseth said pursuing that goal hampers the U.S. from addressing the threat posed by Beijing.
"The U.S. is prioritizing deterring war with China in the Pacific, recognizing the reality of scarcity, and making the resourcing tradeoffs to ensure deterrence does not fail," Hegseth said. Those tradeoffs include a decision to not provide any U.S. troops to support future security guarantees for Kyiv, he added.
— COHEN GROUP SCOOPS SENIOR CHINA HANDS: The Washington-based global consultancy firm The Cohen Group is bolstering its Indo-Pacific talent with the hires of three longtime China hands. A company spokesperson told China Watcher the Cohen Group will welcome aboard former U.S. Ambassador Nicholas Burns, former U.S.-China Business Council president Craig Allen and former Deputy Assistant Secretary of Commerce for China Scott Shaw at a reception later this month.
— KRISHNAMOORTHI: DON'T BRIBE IN BEIJING: Ranking member of the House Select Committee on China Krishnamoorthi is warning U.S. firms not to treat the White House's suspension of enforcement of the Foreign Corrupt Practices Act as a license to bribe in China. Trump issued an executive order Monday suspending enforcement for 180 days while the Department of Justice considers whether the law "harms American economic competitiveness."
Any U.S. firm implicated in corrupt activity during the law's pause "should not be surprised to hear from Congress," Krishnamoorthi said in a letter to the American Chamber of Commerce published Wednesday.
— USTR NOMINEE ON GLIDEPATH TO CONFIRMATION: Trump's U.S. Trade Representative nominee, Jamieson Greer, is one step closer to confirmation after the Senate Finance Committee voted in favor of his nomination Wednesday. Greer tread softly in his comments on U.S.-China ties during his confirmation hearing last week by assuring lawmakers he would seek "balance" in that trade relationship rather than decoupling.
"My guess is we'll always trade with China absent conflagration…but we do have to have diverse export markets for our exporters [besides China]," he said.
TRANSLATING EUROPE
The European Council on Foreign Relations |
SURVEY: EUROPEANS SEE CHINA DOMINANCE: A survey of citizens in 11 European Union countries as well as the United Kingdom, Switzerland and Ukraine foresee China's global power eclipsing that of the U.S. in the next two decades. The results of the European Council on Foreign Relations survey conducted after Trump's November election victory and released Wednesday said that most European citizens see China as a "necessary partner" rather than "an ally, rival or adversary."
But respondents see Beijing's economic and diplomatic muscle edging out that of the U.S. by mid-century.
"They see China as likely to be the strongest country in the world in 20 years' time, stronger than the United States," said Timothy Garton Ash, a professor of European studies at Oxford University who introduced the survey results at a Warsaw press event. Of potential more concern to the U.S. is that the survey revealed that Europeans are "quite relaxed about having the U.S. being just another transactional great power alongside China, India, Brazil and Turkey," Garton Ash added.
— EU PLANS TO SURPASS CHINA AI: The EU will spend more than $200 billion to jumpstart the bloc's efforts to match and surpass the U.S. and China's current technological edge in creating complex artificial intelligence systems, according to the Wall Street Journal Wednesday.
That money for the new InvestAI program will include funding to create facilities to train complex AI systems. The objective is to make Europe "one of the leading AI continents," the report said, quoting European Union Commission President Ursula von der Leyen.
As POLITICO's Pieter Haeck reported Monday, that spending is part of von der Leyen's vision of AI "as a potential magic wand to invigorate Europe's sluggish economy." But cash is only part of the solution. U.S. tech firms interested in AI investments in the bloc say that its thicket of regulations aimed to reduce risky AI development hinders corporate interest in entering the European market.
That reluctance is compounded by EU firms' relative lack of interest in harnessing AI in their operations. EU Commission data released last month showed only 13 percent of European firms were using AI in their operations.
HOT FROM THE CHINA WATCHERSPHERE
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— BEIJING BLASTS TRUMP'S GAZA PLAN: Trump's plans to relocate Gaza's Palestinian population in order to remake the area as a U.S.-controlled "Riviera of the Middle East" got short shrift in Beijing. "Gaza belongs to the Palestinian people … [China] opposes the forced displacement of the people of Gaza," the Foreign Ministry's Guo Jiakun said Wednesday.
— JAPAN, U.S. TO TALK CHINA CHALLENGE: Japanese Defense Minister Gen Nakatani and his U.S. counterpart Pete Hegseth will meet in late March to discuss "regional security challenges posed by China," Japan's Kyodo News reported Wednesday citing unnamed government officials. Those talks will include a focus on "peace and stability in the Taiwan Strait," the report said. That drew a quick rebuke from Beijing. Tokyo and Washington should "stop interfering in China's internal affairs at once," Guo at the Chinese Foreign Ministry spokesperson said on Wednesday. The Pentagon didn't respond to a request for comment.
HEADLINES
South China Morning Post: Can China fill US-sized void in Pacific after Trump's foreign aid freeze?
Foreign Affairs: China's Trump strategy
The Dispatch: The State Department's new China schizophrenia
Associated Press: A timeline of US-China tit-for-tat tariffs since Trump's first term
HEADS UP
— WANG YI IS NEW YORK-BOUND: Chinese Foreign Minister Wang Yi will be in New York on Tuesday to helm a United Nations Security Council event. Wang will lead a session titled "Practicing Multilateralism, Reforming and Improving Global Governance," China's Foreign Ministry said in a statement Monday. Expect Wang to talk up, again, Chinese leader Xi Jinping's signature global initiatives on security, development and culture that Beijing is marketing to developing countries as alternatives to the U.S.-dominated international system.
**The Munich Security Conference gathers everyone with a say in global defense and security, but what's happening behind closed doors? With reporters on the ground, POLITICO Pro Defense finds out for you. Register to join us online and to receive our Pro Morning Defense newsletter.**
ONE BOOK, THREE QUESTIONS
Getty Images/Cambridge University Press |
Responses have been edited for length and clarity.
The Book: China's State-Owned Enterprises: Leadership, Reform and Internationalization
The Author: Wendy Leutert is an assistant professor of East Asian languages and Cultures at Indiana University
Responses have been edited for length and clarity.
What is the most important takeaway from your book?
How even in an authoritarian state like China, leaders of state-owned enterprises exert important influence on policy outcomes and company behavior — both domestically and abroad — through their choices about strategy and structure.
In companies like State Grid, China General Nuclear Power Group, Sinochem and China Railway Engineering Corporation, top executives shape the degree and scope of business diversification, choose which overseas markets to target and how to develop them, and determine asset, capital and personnel allocations.
What was the most surprising thing you learned while writing this book?
How the context and consequences of leadership in Chinese state firms are now truly global. They are among the world's largest by revenue, with 91 ranking on the 2024 Fortune Global 500 list. They routinely partner with foreign multinationals, and those owned by China's central government alone hold nearly a trillion dollars in overseas assets.
That means decision-making in Beijing boardrooms now affects economies, politics, communities and environments worldwide.
How has the Chinese government’s influence on state-owned firms changed under Xi Jinping compared to his predecessor Hu Jintao?
Under President Hu Jintao, the state struggled to regulate state firms and corruption was widespread. Xi made early moves toward economic liberalization, such as "mixed ownership" — which blends public and private ownership by diversifying shareholding structures — and state capital management reforms, which gives state firms more decision-making autonomy over their capital and assets.
But Xi has also ratcheted up political control and anti-corruption efforts inside these companies. And Xi continues the CCP practice of using state firms to pursue China's geopolitical goals, from self-sufficiency and global dominance in key industries and technologies to overseas infrastructure development under his signature Belt and Road Initiative.
Thanks to: Heidi Vogt and digital producers Emma Cordover and Dean Southwell.
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