July 25, 2017

China (中国) Today

Events Review (17.07–23.07.2017)

 

I. Major-Profile Events and Trends in the Development of the Situation around the PRC

One of the main priorities of the PRC is building a strategic partnership with the United States within the framework of implementing the agreements between the leaders of the two countries reached during their meeting in April 2017. The next stage of this was the first round of the China-US Comprehensive Economic Dialogue (Washington, July 19, 2017). The event was co-chaired by China's Vice Premier Wang Yang and US Treasury Secretary Steve Mnuchin and Commerce Secretary Wilbur Ross.

The sides stressed the importance of deepening cooperation between China and the United States as the countries with the largest economies in the world, which determines the strategic value of the China-USA dialogue not only for participants, but for other countries. At this, they confirmed the PRC and the USA's common interests — the basis for deepening cooperation between them in the economic, political and security spheres.

Taking into consideration the above-mentioned circumstances, the participants of the Dialogue discussed a wide range of specific questions regarding trade and economic projects and long-term strategic tasks for bringing the dialogue between the two countries to a qualitatively new level. In particular, the course and prospects of the implementation of the annual plan of cooperation between China and the United States, the direction of mutual investment activity, the possibility of harmonizing macroeconomic policies of the two countries, as well as the forms of interaction between the parties in supporting the globalization of the world economy.

The participants of the meeting reached a consensus on most of these issues, and also confirmed the intention to continue efforts to resolve the problem of the imbalance in bilateral trade. To this end, they are going to expand cooperation in the service sector, build up the volume of mutual investment, increase the share of high-tech products in Sino-US trade, and to better coordinate their actions in financial control and in the work of the UN Security Council, G7 and G20.

According to the co-chairpersons of the Dialogue, the meeting was innovative, pragmatic and constructive and laid a solid foundation for a stable and long-term partnership between China and the United States.

 

The energy sphere is an example of successful development of trade and economic relations between China and the United States. In January–May 2017, China imported from the United States about 1.97 million tons of oil, which is more than 4 times higher than this figure for the entire 2016. The reason for this is D. Trump's policy of lifting restrictions on the export of American oil, which allowed the USA to enter the Chinese market. Thanks to the USA's using high technologies, American oil has already price advantages compared to oil from the Middle East, which allows the United States of America to strengthen its positions both in the Chinese and world energy markets.

 

II. China's Strategic Initiative “The Belt and Road” in the Context of Chinese and Regional Interests

The leadership of the People's Republic of China is taking consistent measures to strengthen China's global influence in the world by linking the “Belt and Road” initiative with other international associations. In particular, China is initiating the interaction between the “Belt and Road” and the BRICS group (includes Brazil, Russia, India, China and South Africa). Besides, it proposes to expand the format of the BRICS group by including other countries. According to the Minister of Foreign Affairs of the People's Republic of China, Wang Yi, resolving this issue will create a powerful platform for deepening the dialogue between a wide circle of countries around the world.

Along with this, China is making efforts to more actively involve the countries of Central and Eastern Europe in the “Belt and Road”. July 17, 2017, a China-CEEC Spokespersons Dialogue in Beijing was held to consider such prospects with the participation of representatives of the State Council of the PRC and CEE leaders at the level of ministers of relevant profiles and their deputies-spokepersons. The meeting in this format was held for the first time. It was stressed that the talks in Beijing should initiate deeper exchanges and cooperation between China and Central and Eastern Europe.

At the same time, the PRC continues its developing the transport infrastructure within the framework of the “Belt and Road”. Thus, within the past 12 months, China has doubled its investment in the seaports of the countries participating in the Chinese initiative. The total volume of the concluded investment agreements is already about 20 billion US dollars.

 

III. Other Trends and Developments Influencing the Situation in and around China

3.1. Politics. Development of China's International Cooperation

Along with the CEE countries' wider participation in the “Belt and Road”, China is deepening its relations with them in other areas too. For example, the continuation of the “2017 China-CEE Countries Political Parties Dialogue”, which was held on 15–17 July in Bucharest, was the China Investment Forum on July 18 this year in Prague. The event was attended by a member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, Member of the Secretariat of the CPC Central Committee Liu Yunshan, as well as the Prime Minister of the Czech Republic B. Sobotka, Deputy Prime Minister of Bulgaria V. Simeonov and other representatives of the leaderships of the CEE countries.

Speaking at the forum, Liu Yunshan pointed out the importance of the “16+1” format as one of the platforms for cooperation within the framework of the Chinese initiative “The Belt and Road”. In this regard, he expressed the PRC's intention to increase investments into joint projects with the countries of Central and Eastern Europe in various fields, including expansion of mutual trade and development of transport infrastructure. Besides, Liu Yunshan stressed the need to strengthen the political trust of the parties as a basis for deepening economic cooperation between them.

Liu Yunshan met with the Prime Minister of the Czech Republic, Bohuslav Sobotka at the forum's sidelines. The representatives of the two countries confirmed the constructive nature of relations between the PRC and the Czech Republic. Based on this, agreements were reached to intensify Sino-Czech contacts in all spheres, including trade, culture, education, sports, tourism and health care.

The PRC's leadership pays special attention to strengthening relations with the Persian Gulf countries, which play an important role in providing China with oil and gas. July 20, 2017, in Beijing, Foreign Minister of China Wang Yi met with Foreign Minister of Qatar Mohammed bin Jassim Al-Thani. During the talks, Wang Yi expressed the PRC's intention to intensify efforts to help resolve the problems surrounding the blockade of Qatar by other countries in the region. To this end, China plans to use its influence in the Arab world, including in the Council of Cooperation of the Arab States of the Persian Gulf. Taking into consideration the common interests in ensuring stability in the region, which is one of the main sources of energy carriers of the world level, the parties agreed to combine the two countries' efforts in the fight against terrorism. Besides, the Foreign Minister of Qatar confirmed his country's being interested in deeper cooperation with the PRC in the implementation of the projects of the “ Belt and Road”.

 

3.2. Economy. Some Aspects of the Economic Situation in China

The Chinese economy continues to demonstrate a stable dynamic of positive development. Thus, according to the National Development and Reform Commission of China, the country's GDP grew by 6.9 % year-on-year in the second quarter of 2017.

There is also an increase in other basic indicators, including: capital investments in fixed assets by 8.6 % (compared to the same period in 2016) to 28 trillion 60.5 billion Yuan; private investment — by 7.2 % to 17 trillion 23.9 billion Yuan; the volume of retail sales of consumer goods — by 10.4 % to 17 trillion 236.9 billion Yuan; imports and exports — by 19.6 % (the highest figure since the second half of 2011); financial revenues to the state budget — by 9.8 % to 430.6 billion Yuan.

The reasons for this trend are as follows:

  • Stable growth of domestic demand for Chinese-made goods. Thus, over the past three years, the share of the contribution of final consumer spending to economic growth was 48.8 %, 59.75 and 65.6 %, respectively. In the first half of 2017, this indicator was 63.4 %;
  • The growing role of innovation as a new driver of the Chinese economy. In the first half of 2017, the added value created in the Chinese high-tech industries grew by 13.1 %. At this, production volumes at enterprises of traditional industries grew only by 6.9 %;
  • Structural reforms of the country's economy, including the closing of loss-making and surplus enterprises, which created more favorable conditions for the work of successful companies.

Besides, of great importance in the development of the Chinese economy is the program “Made in China”, which provides for a comprehensive modernization of the country's industry with the ultimate goal of transforming the PRC into a global generator of innovative technologies. According to the decision of the State Council of China, within the framework of the program, in cities and urban clusters in the eastern, central and western regions of the country, it is planned to create so-called national demonstration zones. In such zones, favorable conditions will be provided for the implementation of pilot projects in the sphere of building innovative production facilities.

 

3.3. Security and Law Enforcement Agencies

The main problem in the development of the security situation in the APR is North Korea's unyielding position. Thus, the leadership of the DPRK has rejected South Korea's proposal to settle the situation around the Korean Peninsula.

More so, according to the American Intelligence, DPRK is preparing the next launch of the intercontinental ballistic missile, which is planned in late July – early August this year. In addition, North Korea is developing the technology for launching ballistic missiles from a submarine.

These North Korea's actions cause the USA's significant concern. Thus, on 22 July 2017, Chairman of the Joint Chiefs of Staff of the US Armed Forces, General Joseph Dunford said that the North Korean nuclear program is the greatest real threat to the security of the United States of America. Proceeding from this, Joseph Dunford did not rule out the possibility of a military conflict between the United States and North Korea.

 

A separate problem in the APR is China's negative attitude to the development of military and military-technical cooperation between the United States and Taiwan. July 17, 2017, the Ministry of Foreign Affairs of China issued an official condemnation of the USA's draft law on national defense (National Defense Authorization Act), which includes a number of activities in this area. In particular, it is planned to exchange visits of military ships of the United States and Taiwan. According to the Ministry of Foreign Affairs of the PRC, such actions of the USA contradict Washington's statements about supporting the policy of “one China”.

 

Within the framework of military cooperation with Russia, the Chinese Navy is developing new marine zones. Last week a group of warships of the Chinese Navy led by the destroyer “Hefei” arrived at the main base of the Russian Baltic Fleet in Baltiysk. The detachment will take part in joint Russian-Chinese exercises “Maritime Interaction-2017” in the Baltic Sea. In the history of Russia and China's relations, this is the first such visit of the ships of China's PLA Navy. Upon completion of the exercises, the Chinese ships will take a rout to St. Petersburg.

During the same period, another flotilla of warships of the PLA Navy made friendly visits to Greece and Turkey. During the ceremonies, was pointed out the positive development of relations between China and Greece and Turkey, including in the military sphere. In general, these visits confirm China's practice to support measures for implementing its economic interests by military events.

 

3.4. Science and Technology

The People's Republic of China confirms the high level of scientific and technical potential of the country occupying the leading positions in the world. This was evidenced by the PRC's exposition at the 13th International Aviation and Space Salon, which was held on 18–23 July 2017 in the city of Zhukovsky, Moscow region of the Russian Federation. More than ten Chinese companies took part in the event, including AVIC, CASIC and CGWIC, which presented a wide range of projects in various spheres. In particular, air defense systems, coast guard, air-to-air missiles and air-to-ground missiles, unmanned aerial vehicles and missile systems were demonstrated.

During the work of the Salon, the Russian optoelectronic holding company “Schwabe” and Chinese Corporation aerospace science and industry CASIC signed a Memorandum of understanding and cooperation for the joint development and production of radio electronic components and equipment. Besides, an agreement was reached to organize in China production of Be-200 aircrafts of a joint Russian-Chinese development.

 

Last week, China also successfully tested the new reconnaissance and strike UAV “Cai Hong-5”. The drone is made of composite materials, the wingspan is 21 meters, the maximum take-off weight is 3.3 tons, it is equipped with an airborne early warning system and has 24 air-to-surface missiles. The UAV is able to stay in the air for up to 60 hours with a range of up to 10 thousand km.

 

Along with this, China continues its activities to study and develop the Arctic zone. According to the plans of the Academy of Sciences of the People's Republic of China, July 19, 2017, started he eighth Arctic scientific expedition based on the scientific research vessel “Xue Long” (”Snow Dragon”). It is planned to conduct a comprehensive examining of the Arctic shipping routes, as well as research in the spheres of biology, hydrology, chemistry and geology of the Arctic Ocean and its coastal seas. At this, the main areas of the expedition will be the Bering Sea, the Chukotka Sea, the East Siberian Sea, the Northwest Shipping Route and the high-latitude waters of the Arctic. The expedition will last 80 days.

 

IV. Plans and prospects for cooperation between China and Ukraine

The PRC is interested in the transport infrastructure of Ukraine, as a component of transport communications within the framework of the “Belt and Road” initiative. In particular, is being discussed the question of the Chinese companies' renting the railway ferry terminal in the Ukrainian port of Chernomorsk with subsequent modernization of its infrastructure and associated transport highways in Ukraine. At this, China can become one of the main users of the ferry in terms of transporting Chinese goods to Europe and vice versa. In order to study this issue, a delegation of the “China Road and Bridge Corporation”, which is one of the largest contractors in the world, visited the port of Chornomorsk last week.

 

A joint Ukrainian-Chinese project on the development of port infrastructure is already being implemented in the Ukrainian port of Yuzhny. July 20, 2017, the “China Harbor Engineering Company” began its work on deepening its internal water area to 16 meters. The implementation of the project will make it possible to put into operation one of the largest grain-packing complexes in Ukraine — the MV Cargo terminal.

 

Besides, China is obviously interested in cooperation with the “Ukrainian Danube Shipping Company” (PJSC UDP). Last week, in Beijing there was a meeting of representatives of the UDP and the “China National Technical Import&Export Corporation” (CNTIC), during which the prospects for the implementation of the investment project to upgrade the fleet of the “Danube Shipping Company” were discussed. The Chinese side offers various options for financing the construction of new tugs, barges and other boats for the UDP.