January 31, 2018

China (中国) Today

Events Review (22.01–28.01.2018)

 

I. Major Events and Trends in the Development of the Situation Around the PRC

The key global event of importance for the PRC was the 2018 World Economic Forum in Davos, Switzerland, on January 23–26, 2018. The Forum was attended by the member of the Political Bureau of the CPC Central Committee, director of the Office of the Central Leading Group on Financial and Economic Affairs Liu He, as well as a delegation of Chinese businessmen, including the founder and chairman of the “Alibaba” Group Jack Ma and the founder of the JD.com Liu Qiangdong.

In his speech at the Forum, Liu He pointed out the importance of the 19th National Congress of the Communist Party of China, which determined China's strategic goals, namely the building of a moderately prosperous society by 2020 and a modernized socialist state by 2050. Within the framework of implementing such plans, the main directions of the leadership of the PRC will remain the transition from accelerated growth of the country to its qualitative development, implementation of structural reform in the field of supply and consumption, prevention and elimination of major risks, poverty eradication, and the struggle against pollution of the environment.

At the same time, Liu He emphasized the PRC leadership's intention to continue to fully promote the country's openness to the world (including by facilitating access to the Chinese market), to actively implement “The Belt and Road” initiative, to support the multilateral trade system, to encourage the formation of the new type international relations, as well as to seek the creation of a world community of a common destiny.

Member of the Political Bureau of the CPC Central Committee Liu He at the 2018 World Economic Forum in Davos
Member of the Political Bureau of the CPC Central Committee Liu He
at the 2018 World Economic Forum in Davos

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

A significant component in the development of the Chinese initiative “The Belt and Road” is the participation in its implementation of state-owned companies and provinces of the People's Republic of China. According to the report of the State Development and Investment Corporation of China (SDIC), over the past years SDIC has accelerated the process of entering the external markets, including those of “The Belt and Road” countries. To date, the international activity of SDIC covers 78 countries, of which 28 are participating in the Chinese initiative. In 2017, revenues from SDIC abroad amounted to 5.2 billion US dollars, including about 4 billion US dollars — from work in countries of the “Belt and Road”.

In turn, in 2017, the total volume of contracts with “The Belt and Road” countries, which were concluded at the level of the Chinese regions, amounted to about 120 billion US dollars. Due to this, a significant contribution was made to the growth of the local economy. In particular, at the end of 2017, the total volume of contracts between Sichuan Province (Southwestern China) and 57 countries and regions along “The Belt and Road” reached 9.7 billion US dollars. Enterprises in Shandong Province (East China), which supply agricultural products to Central Asia and other regions, actively participate in the work of “The Belt and Road”. Significant success in the development of cooperation with the countries of “The Belt and Road” was achieved by Xinjiang Uighur Autonomous Region (Northwest China), which allowed to increase the volume of foreign trade in the region by about 17 %.

China's “The Belt and Road” Initiative
China's “The Belt and Road” Initiative

In total, in 2017, the trade turnover between China and the countries along “The Belt and Road” reached 1.15 trillion US dollars, which is by 17.8 % more than the previous year. At this, the growth of the PRC's exports to these countries increased by 12.1 %, and imports — by 26.8 %. At the same time, according to the results of last year, the volume of direct Chinese investments in the countries of “The Belt and Road” amounted to 14.4 billion US dollars. Contracts were signed worth 144.3 billion US dollars, which is by 14.5 % more than the previous year's figure.

 

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

3.1. Politics. Development of China's International Cooperation

China's Ambassador to the United States Cui Tiankai in an interview with the USA Today
China's Ambassador to the United States Cui Tiankai in an interview with the USA Today

China and the United States continue to pursue a consistent policy of building strategic partnership between the two countries as the leading centers of power in the world. According to China's Ambassador to the United States Cui Tiankai, in an interview with the USA Today, last year, the development of Sino-US relations maintained overall stability and made it possible to achieve a significant progress, in particular through the four high-level dialogue mechanisms. In view of this, Cui Tiankai expressed his hope for further deepening of the cooperation of the parties.

At the same time, the PRC and the USA have a number of disagreements and problems, including in the security sphere. Thus, the Ministry of Foreign Affairs of the People's Republic of China criticized the new US Defense Strategy, which defines China as one of the sources of threats to the interests and security of the United States of America. In particular, such threats are called the PRC's intentions to undermine the USA's leadership. According to the statement by the Foreign Ministry of China, the new American strategy deliberately distorts the essence of the defense and foreign policy of the People's Republic of China, as well as exacerbates the issue of strategic rivalry of great powers, which is a fundamental mistake. At the same time, emphasis is placed on China's pursuit of a peaceful course and support for building a safe world for all humanity. Based on this, a hope is expressed for the USA's giving up the thinking of the times of the Cold War and for its tolerant and adequate attitude to the PRC.

 

An important direction of China's foreign policy remains the deepening of cooperation with developing countries. On January 22, 2018, the Second Ministerial Meeting of the Forum of China and the Community of Latin American and Caribbean States (CELAC) took place in Santiago.

The prospects of deepening cooperation between the participants of the mentioned format in the economic and political spheres were discussed. The participants of the meeting appreciated the work of the China-CELAC Forum. Foreign Minister of the People's Republic of China Wang Yi said that within the framework of the implementation of the five-year cooperation plan, significant progress was made in the areas of trade, finance, energy, science and cultural exchanges. At this, China and its partners demonstrated a common position on the construction of an open world economy and the development of economic globalization in the interests of mutual benefit. Based on the success achieved, Wang Yi proposed extending the range of joint actions between China and the CELAC countries, including through the implementation of the following projects: development of transport links between Asia and Latin America; creation of an open and mutually beneficial market and simplification of trade and investment procedures; the PRC's participation in the building of independent, diversified and innovative economies of its political and economic partners, as well as their involvement in “The Belt and Road”. As a result of the Forum, three final documents were adopted, namely: “Santiago Declaration”, China-CELAC Cooperation Program for 2019–2021, and Special Statement on “The Belt and Road” initiative, which consolidates the intentions of the parties to deepen cooperation and joint development. While in Santiago, Wang Yi also held separate meetings with Foreign Ministers of the region, as well as heads of regional organizations in Latin America.

Participants China-CELAC Forum in Santiago
Participants China-CELAC Forum in Santiago

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

Yangtze River Economic Belt
Yangtze River Economic Belt

The Government of the People's Republic of China is making consistent efforts for the country's industrial development. In particular, in January this year, China launched the implementation of a large-scale project to build industrial clusters in the economic zone along the largest in the country Yangtze River. The clusters will be around large cities with powerful industrial capacities. Within the framework of clusters, more than 100 economic zones and industrial parks will be created. The Yangtze River Economic Belt covers nine provinces and two cities of central subordination and occupies about one-fifth of the territory of the People's Republic of China. About 600 million people live in the area, and it accounts for 40 % of the country's GDP. An important advantage of the Yangtze River Basin is the possibility of providing cheap waterways transport, which makes easier the establishment of productive cooperation between different enterprises.

 

Steps are also being taken to strengthen the maritime sector of the Chinese economy. This issue was discussed on January 22, 2018, at the National Maritime Work Meeting in Beijing. During the event, Director of the State Oceanic Administration of the PRC Wang Hong pointed out the positive dynamics of the development of the industry, which demonstrates a stable growth of key indicators. For example, in 2017, the gross output of the maritime sector of China's economy reached 1.2 trillion US dollars, which is 10 % of the country's GDP. At this, for the last five years, the average annual growth rate of the industry was 7.5 %. According to the plans of the Government of the People's Republic of China, by 2020, gross output of the country's maritime sector should increase to 1.5 trillion US dollars and by 2035 its share in GDP — grow to 15 %.

 

The government is paying special attention to the state support for entrepreneurship. Last week the PRC's capital hosted the 5th national congress of self-employed individuals. Chinese Premier Li Keqiang took part in the congress and pointed out the important role of small businesses in implementing the country's economic development plans, stimulating innovation, expanding employment and improving people's lives. On this basis, Li Keqiang expressed the government's intention to continue the consistent policy of promoting the work of individual entrepreneurs. At the same time, China's Premier called on entrepreneurs to raise their responsibility for the quality of products and services.

According to the statistics of the People's Republic of China, to date, in the country there are 65.79 million individual households and more than 27.26 million private enterprises, employing 341 million people. As a whole, they account for 94.8 % of market participants in the country. At this, the number of such entities is steadily growing from year to year.

 

3.3. Security and Law Enforcement Agencies

Director of the CIA Mike Pompeo with “CBS This Morning”
Director of the CIA Mike Pompeo
with “CBS This Morning”

Situation around the Korean Peninsula. The USA's leadership expresses its deep concern about the strengthening of the DPRK's missile and nuclear capabilities. According to Director of the CIA Mike Pompeo, this year, North Korea will be able to obtain sufficient strength and means to create a real threat to the security of the United States of America. That is why the Director of the CIA confirmed the consideration by the US authorities of “all possible options against the DPRK”.

At the same time, the United States continues to accuse Russia and the PRC of helping North Korea bypass the UN Security Council's sanctions. According to US Intelligence, Russia is carrying out intermediary functions in the DPRK's operations to supply its coal to other countries, in particular Japan. Earlier, the facts of Russia's oil supplies to North Korea by sea were already disclosed in the form of its export to China. In addition, the leadership of the Russian Federation categorically refuses to recognize the USA's sanctions against the DPRK.

In view of this, on January 24, 2018, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed additional restrictions on nine companies and six oil, shipping and trading companies in Russia and the PRC cooperating with North Korea. Besides, OFAC imposed sanctions against the DPRK's Ministry of Crude Oil Industry, which controls the supply of crude oil to the country.

 

China's Military Activities. According to the plans for the modernization of the PLA, the PRC continues to develop new types of military equipment based on modern technology. In order to make such measures more efficient, 120 scientists in the field of artificial intelligence and quantum technologies for military-technical subjects have been selected to work on the military-technical theme. Due to this, Command of the PLA hopes to achieve parity with the USA in this sphere.

 

3.4. Science and Technology

One of the main directions of the PRC's innovation development is the implementation of a complex of programs for the development of outer space. On January 23, “Shijian-13”, China's first high-throughout communication satellite, was put into service after completing a key laser communication test. As part of the testing, for the first time in the world, an experiment was conducted to establish a two-way laser line between the high-orbit satellite and the Earth. The satellite's equipment can provide up to 20 gigabytes of data per second, which exceeds the combined capabilities of all space communication systems that were created by China before now.

 

Sales of new energy vehicles in China
Sales of new energy vehicles in China

Measures to develop new transport systems are being continued on the basis of modern innovative technologies. According to the Ministry of Science and Technology, China will build a technological innovation center for new energy vehicles (NEV) in Beijing. Leading profile research institutions from China and other countries will be involved in the work of the Center. Today China is already the world leader in this sphere. In 2017, the country sold 777 thousand cars with NEV engines, which is more than in all other countries. By 2020, they are going to be selling up to 2 million NEVs a year.

It is also planned to start mass production of “smart” cars and the construction of “smart” highways. According to such plans, by 2020, the share of cars with automated control systems will be brought to 50 % of the total output of automotive equipment. By the same time, 90 % of the major cities and high-speed highways in the PRC will be covered by the wireless network of support for “smart” cars (including control and warning functions).

 

An important foundation for China's success in these spheres is the state support for the country's scientific and technological development. At the beginning of 2018, the Government the People's Republic of China allocated 157 million US dollars to implement a number of major innovative projects that include the development of modern technologies in the sphere of food security, modernization of traditional Chinese medicine and pharmaceuticals, early warning and prevention of major natural disasters, and the development of intellectual robotics. All in all, 68 priority scientific and technical projects for the total amount of 7 billion US dollars are implemented with the state's support.

 

IV. Plans and Prospects for Cooperation between China and Ukraine

As part of the deepening of cooperation with Ukraine, the PRC pays special attention to promoting the development of Ukraine's transport infrastructure as a component of “The Belt and Road”. First of all, it concerns the southern regions of Ukraine, where the main ports and other transport communications of the country are located.

Yuyan Zhang, director of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, on a conference in Odesa
Yuyan Zhang, director of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, on a conference in Odesa

January 23, 2018, a scientific-practical conference “Trade-Economic and Humanitarian Cooperation Between Ukraine and China in the Context of “The Belt and Road” was held at the International Humanitarian University (MHU) in Odesa. The event was attended by a representative delegation of the Chinese Institute of World Economics and Politics of the Chinese Academy of Social Sciences, as well as by leading Odesa scientists, political scientists and economists. The issues of investment attractiveness and geographical advantages of Odesa and Odesa region were discussed along with the plans for the PRC's cooperation with the region. Taking into consideration the importance of the successful implementation of such plans, an agreement was reached at a separate meeting of the leadership of the International Humanitarian University with the Chinese delegation to establish a Center for Legal Protection of Chinese Citizens on the basis of MHU. Today, over 2,000 Chinese citizens work in Odesa, which determines the relevance of such a decision. The Center will involve lawyers from the Institute of Law, Economics and International Relations of the MHU, as well as lecturers and postgraduates.