HONG KONG: A FIGHT AGAINST SUBORDINATION

The present mass opposition and upheaval against a proposed extradition law by Chief Executive Carrie Lam, is driven by the same factor. But, this time precious rights and freedoms guaranteed under “one country, two systems” are at stake.

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Sanjana Dhar, Research Intern, Institute of Chinese Studies, Delhi

Hong Kongers are known for mass protests whenever they have been pushed to a corner by their government. The present mass opposition and upheaval against a proposed extradition law by Chief Executive Carrie Lam, is driven by the same factor. But, this time precious rights and freedoms guaranteed under “one country, two systems” are at stake.

The Fugitive Offenders and Mutual Legislation (Amendment) Bill 2019, or the Extradition law of Hong Kong has garnered widespread attention. The proposed law deals with the extradition of fugitives from Hong Kong to Taiwan, Macau and mainland China. It was initiated by Carrie Lam in February 2019 and the motivation for it was due to a murder case, where a man from Hong Kong murdered his girlfriend in Taiwan and fled back home. Extradition requests made by Taiwanese officials could not be carried forward due to the absence of an extradition treaty between Hong Kong and Taiwan. Carrie Lam proposed this law in the hopes of filling a “legal loophole” because without a prior treaty in place, extradition cannot be carried out. With the formulation of a new extradition treaty, criminals cannot evade punishments for crimes committed in a different country.

The present situation of mass protests in Hong Kong is driven by the fact that the extradition law will give Beijing more leeway in matters of suppressing democracy and freedom in Hong Kong. Central authorities could arbitrarily arrest individuals who oppose their authority and bring them to justice under the opaque and politicised judicial system in the mainland. This is in contrast with the judicial system in Hong Kong, which is guided by rule of law. Beijing’s overbearing involvement in Hong Kong is in contradiction to the “one country, two systems” policy, which allows Hong Kong to maintain its partial democracy and free market within the territory of China. Fear of erosion of this policy has shaken the minds of the public and they are choosing to express this fear in the form of fierce protests.

Amidst popular discontent for the law, Carrie Lam initially had a strong position and vouched that the proposed law would in no way compromise human rights principles of Hong Kong. The final say in the granting of extradition requests would rest with Hong Kong and religious and political matters would be kept out of the purview. Yet, growing public dissatisfaction against the bill has undermined her image and created demands for her resignation.

The mass protests of 9 and 12 June is evidence of the dissatisfaction among Hong Kong citizens with the turn of events. It is testimony that Hong Kongers are ready for what has been touted as the “last fight” for safeguarding their democracy and freedom.

The protests on 12 June gave the people a temporary relief as the second round of discussions of the bill was cancelled due to blockades by protesters near the government headquarters. However, the protests took an unprecedented turn as the police used tear gas and fired rubber bullets at the protesters. Media outlets have dubbed it as violence which has never been witnessed in the history of Hong Kong and the police force is being held accountable by the public for such a blatant act. Rising protests after such violence has forced Carrie Lam to suspend discussions on the law indefinitely. Her apology for the negligence on her part in involving the opinions of the society in making the law and expediting the passing of the law at the cost of peace in Hong Kong has brought temporary relief, but the people do not intend to stop until the bill is entirely withdrawn.

Undoubtedly, these events have drawn the attention of the international community. Leaders all over the world have come out in support of the anti-extradition protests and voiced their concerns of Hong Kong transforming into an illiberal region, not suitable for its once reputed liberal, market oriented society. Multiple rallies have taken place worldwide in support of the protesters. Hong Kongers have also urged foreign leaders to discuss the situation in the G-20 Summit and back demands of withdrawal of the bill.

China is at the center of this issue, although its direct involvement in the matter is not clear. Regardless, Chinese foreign ministry spokesman, Geng Shuang initially came out in full support of the administration in Hong Kong. Beijing believed the involvement of “foreign forces” was aggravating the situation and filling the public with animosity towards the law, which would not jeopardise the rule of law and justice in Hong Kong. But Beijing has now backtracked and is in support of the suspension of the bill.

The shift in Beijing’s stance reflects the precarious condition China is presently in, due to the trade war with the USA and the slowing economy. Can Xi Jinping afford to counter the situation in Hong Kong through force and add another tragedy in China’s history or could the protests in Hong Kong further attenuate Beijing’s vulnerabilities, are some of the questions which are yet to be answered. But at the moment, Hong Kongers seem to have gotten the better of Beijing.

The black clad protests of 16 June of nearly two million people sent a strong message to the administration over the people’s demands of complete withdrawal of the bill. Protesters won’t be satisfied only with the suspension of the bill because they speculate the administration will bring back discussions once the protesters have calmed down.

The situation in Hong Kong demonstrates the resolution of the protesters and their concerns about erosion of the “one country two systems” and its eventual merging with the system present in mainland China. Fierce resistance of the people is not just against the extradition law, but this upheaval is critical for Hong Kongers to safeguard their prized rights and freedoms in the face of arbitrariness and subordination from Beijing.

Agricultural Industry amidst the 2018 US-China Trade War

This article discusses the current scenario of the two markets, with a particular focus on soybeans and associated businesses.

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Agricultural Industry amidst the 2018 US-China Trade War

VIDUSHI R SINGH, Research Intern, Institute of Chinese Studies

The US-China trade war of 2018 began with tariffs being imposed on core sectors, such as industry inputs (steel, aluminium tariffs by the US) and agriculture (grain and seed tariffs by China). These attacks on primary industries have led to huge outcries on both sides, with several calls for the hurrying up of ongoing trade negotiations so that the political agendas of the leaders do not hurt the ordinary people.

This article discusses the current scenario of the two markets, with a particular focus on soybeans and associated businesses. Both countries have faced losses and market instability as a result of tariffs being put on agricultural commodities this manoeuvre, but while neither of the countries have ‘won’ in this particular sector, China seems to have incurred a lesser loss than the US.

US Agricultural Industry

The first round of the trade war saw China putting a 25 per cent retaliatory tariff on several US goods. One of the most critical commodities in the Chinese list was soybean – produced in regions that were majority supporters of Trump in 2016. The cleverly targeted tariffs have wreaked havoc on the US soybean market, with prices falling by over 13.4 per cent (based on the author’s calculations and data from United States Department of Agriculture) since May 2018. The fall in prices has further been caused by an approximate 78.6 per cent fall in demand from Chinese importers as of April 2019, based on a year on year comparison. The trade negotiations between President Trump and President Xi have included promises by the Chinese government regarding buying of over 5 million tonnes of soybean from the US, but no deadline has been set. It is possible that the unreliability of the US as a supplier of essential commodities to China has encouraged the Chinese populace to look for substitutes elsewhere, and US farmers are unlikely to have the same access to the Chinese market as they once enjoyed. As of now, there has been an almost complete crowding out of US soybean from the Chinese market, due to its inability to compete with local and Brazilian substitutes on prices. If the Chinese tariffs stay in place, the USDA projections have concluded that US soybean exports will not be able to reach pre-trade war levels even by 2024.

Another factor creating problems for the US agriculture industry is the increased costs of farm equipment and machinery. The tariffs on steel and aluminium imposed by Trump have led to a rise in the production costs of farm machinery. This, combined with the low expectations farmers have for the coming planting seasons, has resulted in a situation where farmer bankruptcies are on the rise, and US agricultural trade surplus has hit an unprecedented low, the lowest it has been since 2007. The plantation of soybean has fallen by 5 per cent in the last one year and is anticipated to reduce further, as farmers move away from soybean to other, more profitable crops. While the US Department of Agriculture has promised aid to farmers adding up to USD 12 billion, they have also asserted that this will only be a one-time assistance to help farmers regain control of farm operations.

Chinese Agricultural Industry

As for the Chinese side of the agriculture industry, the scenario seems to be mixed, as opposed to the blatantly negative situation that the US agricultural industry is facing.

The Central Committee of the Communist Party of China and the State Council unveiled its Number 1 Agricultural Document on 19 February 2019. The document focused on agricultural and rural issues and outlined policy goals for 2019 and 2020. Its focus on the “profound changes in the external environment” and ways to mitigate the same highlights China’s wariness with regards to the rising tensions in the trade war. This announcement falls in line with China’s 2015 mission to achieve absolute food security by balancing production and environmental concerns. While the agricultural reforms and the shift to the household responsibility system have helped increase productivity of land, China’s reliability on foreign markets for soybean has become a cause of concern, bringing down the agricultural trade balance, which would otherwise have been positive.

The government has, however, acted commendably fast in the past year to shift all soybean imports from the US to Brazil, which has allowed Chinese consumers some protection from the increased prices of US soybean. This has been followed by government encouragement of increased domestic production of soybean and other feed grains. However, the lower profitability of cultivation of soybean over rice or wheat has created a new need for subsidy and minimum procurement schemes.

Another factor cushioning Chinese soybean market has been the outbreak of African swine fever in various parts of the country since August 2018. The hog population in China has fallen by an estimated 13 per cent, and this has created a consequential fall in demand for feed grains and seeds. Since swine feed in China is 20 per cent composed of soybeans, this fall in demand has allowed for market prices to stabilize at a lower level than previously anticipated.

These steps have also been accompanied by reduced quality restrictions on imports and increased incentivisation for agricultural investment, as announced in the latest Number 1 document. So while there has been an undeniable fall in supply and increased uncertainty in the market, the government’s response has been able to prevent the need for total abstention from the consumption of soybean and several other vital parts of people’s diets as well as livestock feed.

Conclusion

The attempts by the two countries to regain equilibrium in their respective agricultural markets have provided some comfort to the consumers and producers of the tariffed products. The Chinese government, however, seems to have leveraged its position better to create changes very quickly to shield its populace from the worst impacts of the trade war. The US government, on the other hand, has only implemented superficial steps to manage the impact of the trade war in its borders, instead choosing to leave the outcome to market forces.

Irrespective of these safeguarding attempts by the governments, the agricultural markets in both countries are doing worse than previous financial years. Falling demands and accumulating stocks have created an imbalance in the global market. In the absence of intervention, this may result in an economic crash, as US farmers find themselves unable to repay loans and Chinese livestock producers fall short of sufficiently nutritious feed. Relaxing quality controls and giving out aids are sure to help in the short run; however, given the inconsistencies in the market, long-term solutions are necessary.

 

Chinese Steel Industry: How Did the World’s Largest Steel Producer Protect Itself from Global Slowdown and a Trade War?

The US-China trade war and rising environmental concerns have led to a slowdown in global infrastructural projects in 2018. The objective of this short piece is to understand the impact of these global phenomena on the Chinese steel industry.

Vidushi R Singh, Research Intern, Institute of Chinese Studies

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How Did the World’s Largest Steel Producer Protect Itself from Global Slowdown and a Trade War?

China has been the world leader in steel production since 2008, with about half of the total world steel exports originating in China. The US-China trade war and rising environmental concerns have led to a slowdown in global infrastructural projects in 2018. The objective of this short piece is to understand the impact of these global phenomena on the Chinese steel industry.

Economic logic follows that excess supply and reduced demand, as have been observed in recent times, would lead to falling prices. The inelasticity of supply should have meant low prices for the Chinese steel market. As can be observed in the following graph, prices dipped following the first steel tariff announcement from the United States Trade Representative’s (USTR) office on 1 March 2018. However, while prices did fall, they also rebounded much sooner than initially predicted. This trend can also be observed in the graph, with prices rising back up April 2018 onwards. However, the prices crashed again in November 2018, due to falling demand in downstream sectors, such as infrastructure and manufacturing industries, as a speculative response to rising tariffs between the US and China. Chinese steel manufacturers also registered losses for the first time in the last three years, in November 2018. Despite this, the Chinese steel economy remained largely immune to economic shocks.

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Source: Trading Economics

The Chinese conduit to coming out unscathed lies in the supply side reforms, initiated by the government in 2015. The end of the Chinese construction boom in 2014 had instigated the government to carry out reforms to cut down on steel production. As the growth rate of the construction industry fell from 10% in 2014 to just 2% in 2015, steel production was reigned in, with the growth rate actually falling to a negative value in 2015 (National Bureau of Statistics of China). The government decided to intervene at this point so as to ensure the survival of the steel industry and avoid mass layoffs that would have resulted from a slowdown in the industry. The goal decided in 2015 was to reduce capacity by 45 million tonnes, a target that was attained by the latter half of 2017, much before the set deadline of 2020.

Thus, when the demand growth rate fell, the Chinese steel industry had already moved on to capacity optimization and did not face grave overutilization. This allowed for the industry to shift supply rapidly, and safeguard itself from future tariffs as well. This success of the Chinese steel industry is evident in the fact that since 1 January 2019, Chinese steel prices have increased consistently. The shift from high-grade iron ore to lower grades has also allowed manufacturers to increase margins by cutting costs.

One interesting factor in this situation is the ability of the Chinese steel manufacturers to divert inventory to Chinese infrastructural projects under the ‘Made in China 2025’ initiative and the Belt and Road initiative. While it is hard to ascertain the exact amount of steel inventory being fed into these initiatives, they do provide the steel industry with a reliable sink to use up inventory, while cutting down on any overutilization, thus stabilizing prices in the short run. The government’s plans to expand on infrastructure development in the coming years also provides support to investor speculations and have played a role in stabilizing the Chinese steel economy.

The 25 per cent tariffs imposed on steel imports by President Trump, thus, fall short of having a real impact on the Chinese steel industry, in part due to China’s relatively unimportant position in US steel imports (China is the 25th largest exporter of steel to the USA), and in part because of the foresight of the Chinese government.

So while the Chinese steel industry did face multiple shocks over the course of the 2018 trade war and global infrastructural slowdown, the government’s preemptive measures of securing a strategic sector allowed it to come out of the tussle relatively unharmed. While the opacity of government and industrial operations make it tough to analyze the situation in greater depth, one can say that the Chinese steel industry has been able to cope with the changing world geopolitical scenario with ease.

Wang Huning: China’s Amit Shah

Jabin T. Jacob, PhD, Fellow, Institute of Chinese Studies

If Shah’s job is to help Modi do the electoral math and draw up strategies to win elections, it is Wang’s job to help create the narrative that legitimizes Xi Jinping in power in an authoritarian system.

As the National People’s Congress in China cleared a constitutional amendment on Sunday allowing President Xi Jinping to remain president for life, here is a look at Xi’s closest confidante and politburo member Wang Huning, who is also known to be the brain behind President Xi.

Wang has been speechwriter and ideologue to three successive General Secretaries of the CPC –- Jiang Zemin, Hu Jintao and now Xi. Many key concepts for these three leaders have been fashioned and refined under Wang’s watch in the Party’s Central Policy Research Office since 2002 and later as a member of the Central Secretariat.

Indeed, one might wonder if China’s – and President Xi Jinping’s — slow turn towards a more assertive stance has not been influenced also by Wang’s personal ideological proclivities conveyed through the mouths of China’s leaders.

In practical terms, Wang Huning is to Xi Jinping what Amit Shah is to Narendra Modi. If Shah’s job is to help Modi do the electoral math and draw up strategies to win elections, it is Wang’s job to help create the narrative that legitimises Xi Jinping in power in an authoritarian system Continue reading “Wang Huning: China’s Amit Shah”

Term Limits Off for Xi: Some Reflections for India

Jabin T. Jacob, PhD, Fellow, Institute of Chinese Studies

When China’s National People’s Congress – the rough equivalent of India’s Lok Sabha, but toothless – meets in the coming week it has to deal with a proposal by the ruling Communist Party of China to amend the state constitution to remove term limits for the President of the state. Coming from where it does, this is pretty much a direct order to the NPC to remove the term limits.

Removing term limits for the President, imposed in 1982, is a roundabout way of saying that the norm of two terms for the CPC General Secretary – Xi’s more powerful avatar – too, is not set in stone. Continue reading “Term Limits Off for Xi: Some Reflections for India”

Xi Jinping Has Feet of Clay

Jabin T. Jacob, PhD, Fellow, Institute of Chinese Studies

The Central Committee of the Communist Party of China has suggested removing term limits for the President and Vice-President of the People’s Republic of China. The immediate implication is that President Xi Jinping could conceivably continue for a third term or more in office.

However, the more important one is that this sets a precedent for doing away with the norm of a two-term limit developed over the past couple of decades for the CPC General Secretary – the most powerful position Xi holds.

This development then appears to confirm long-standing speculation that Xi was aiming to carry on in power at the next CPC National Congress in 2022.

Other amendments to the PRC constitution being mooted by the CPC also confirm the possibility. One such is the addition of ‘Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era’ in the PRC Constitution. In this case, this is a foregone conclusion since Xi Jinping Thought was already included in the CPC constitution at the 19th Party National Congress last October.

To understand what exactly has happened and how, Indians need only remember how their own bureaucrats bend the rules or create new ones at will, if necessary – to push their own aggrandizement while in office or to comfortable post-retirement sinecures.

Like the Indian babu – and CPC cadre are essentially bureaucrat-politicians – Xi and the CPC justify these moves in the name of ‘efficiency’, ‘expertise’, ‘capability’, even ‘merit’ and ‘respect for the Constitution’.

Note, for instance, that the state-run Xinhua News Agency had quoted Xi – only a few hours before news of the proposed changes to the PRC Constitution was announced – as saying that ‘No organization or individual has the power to overstep the Constitution or the law’.

Driving home this point even more sharply is a Global Times editorial that declares brazenly, ‘We are living in a changing and sophisticated era where individuals have limited horizon and capability’. Somehow the point about one individual being empowered at the expense of 1.3 billion others has been missed.

In fact, there is a clear provision in one of the proposed amendments that the director of the national supervisory commission – a new state organ that is coming into being in the PRC – shall serve no more than two consecutive terms. Why are there term limits for one state official and not the Chinese President and Vice-President?

This blindness to irony or hypocrisy and fundamentally paternalist and non-democratic attitude is unsurprising in societies and polities, which are essentially feudal in nature and/or are used to strong-man/centralised rule such as China or India.

Weakness not Strength

Where once, the CPC thought it could learn from the outside world and control the consequences at the same time or at least that the consequences would not threaten fundamentally threaten its own existence, today the measures undertaken by Xi suggest that such confidence no longer exists.

From the heavy-handed anti-corruption campaign to the ever increasing number of directives and instructions to universities, the media and Party cadre about ideological red lines and the constant drumbeat of state-driven propaganda and adulation of Xi to the extreme surveillance measures used against its own citizens, the Party looks less like the ruling party that it is and more like it is trying to stave off some imminent crisis.

Despite the restrictions on their freedom of expression meanwhile, Chinese citizens have found ways and means to work around censorship using technology as well as their own sarcasm and wit and the extraordinary malleability of the Chinese language itself to make their point.

For instance one image that has gone viral on Chinese social media is of Winnie the Pooh hugging a huge pot of honey and saying in Chinese, ‘Find the thing you love and stick with it’. References to Winnie the Pooh were banned on Chinese social media in the run-up to the 19th Party Congress because it was used to refer to Xi obliquely and the implication of the latest image too is clear.

The very fact that the CPC under Xi finds it necessary to declare the infallibility of the Party and to enshrine it in the PRC constitution – another proposed amendment is the inclusion of the statement ‘the leadership of the Communist Party of China is the defining feature of socialism with Chinese characteristics’ – suggests a lack of confidence within the Party about both its role and capability in holding both itself and the country together.

This is not to say that China is falling apart as many Indian strategic analysts appear to hope for but that China’s internal political dynamics deserve greater attention in India for more objective assessments of China’s foreign policy goals and intentions.

The proposed amendments to the PRC constitution and the apparent centralization of power in Xi’s hands point to a fundamental weakness of institutions in China. No rising power can afford to hollow out its own institutions and hand over power to one single individual howsoever brilliant or capable.

The more China sees a centralization of power in an individual or even a coterie of individuals, the less likely it will have the required flexibility to deal with either its internal problems or its external challenges.This, by the way, is as true of democracies as it is of authoritarian states. Indeed, India’s own experiences since Independence should be instructive.

 

This article was originally published as ‘The “Emperor” Has Feet of Clay: Decoding the Xi Jinping Era’, News18, 27 February 2018.

India Becoming a Threat in Chinese Imagination

Hemant Adlakha, professor of Chinese at Jawaharlal Nehru University, New Delhi and Honorary Fellow, Institute of Chinese Studies (ICS), Delhi.

As the new year gets underway, and Chinese foreign policy analysts join their counterparts around the world in assessing the events of 2017, the emerging international relations (IR) discourse in Beijing is quite a revelation — at least to the Japanese and Indian strategic affairs community.

While most Chinese believe Japan to be the second biggest threat to China’s “peaceful rise,” according to a few Chinese experts, the rising global profile of India, especially under the “right-wing” nationalist Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP), has gone unacknowledged. Continue reading “India Becoming a Threat in Chinese Imagination”