TMP roundup Jan 26-27: CATL expands production in Germany; India expects more conflicts with Chinese troops
And a popular video on Douyin.
Dear China watchers, welcome to another middle-powers roundup.
Quick question, if I use TMP as an acronym for the middle powers. Does that work? Please help.
With China news being relatively subdued recently, I hope you are enjoying the quieter time.
Today's roundup includes news from three key regions: East Asia, Europe, and Indo-Pacific with a "fun" video at the end to set you up for a relaxing weekend.
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Canada
Reports of China's attempts to access Canada's scientific research via university collaborations have resulted in real-life changes this week. About two-thirds of research grant applications sent to Canadian national security agencies for assessment have been denied funding.
The Natural Sciences and Engineering Research Council (NSERC) rejected the applications under tightened rules to protect Canadian intellectual property from authoritarian governments, with China being one of Ottawa's top concerns.
These applications were in the field of aerospace, energy, and communications technology sectors.
The NSERC sought further guidance and advice from Canada's intelligence agency.
East Asia
South Korea
South Korea will keep its restrictions on the entry of short-term travellers from China throughout February, citing concerns about worsening COVID-19 spread after the Lunar New Year holidays.
All passengers from China, Hong Kong, and Macao are required to present negative test results taken within two days of arrival and will be tested again upon arrival.
South Korea halted most short-term visa issuance at consulates in China in early January due to a surge in cases and potential new mutations. In response, China suspended short-term visa applications from South Korea, prompting concerns over business interruptions in a country that heavily depends on exports to China.
North Korea
Troy Stangarone, a senior director and fellow at the Korea Economic Institute of America, wrote in an article for Diplomat that recent data suggests North Korea is expanding exports of non-sanctioned items to China as a way to adapt to the U.N. sanctions.
Stangarone notes that North Korea has been using stolen cryptocurrency to finance its weapons programs and imports during the pandemic and that the country's trade is starting to recover as it develops legitimate revenue streams.
For example, North Korea has increased exports of electricity from the hydroelectric plants it runs with China during the pandemic, which are exempt from U.N. sanctions. These exports grew from $11.4 million in 2019 to $20.4 million in 2022."
Note this analysis from him, “...the significant growth in exports of tungsten and molybdenum stand out at a time when North Korea’s overall exports remain depressed...These items won’t replace the revenue generated by North Korea’s sanctioned items, but they may signal Pyongyang’s continued attempt to adapt to sanctions to find new sources of revenue.”
Japan
One Japanese lawmaker is expecting Beijing to retaliate against upcoming chip bans imposed by Japan, the U.S., and the Netherlands. Shigeharu Aoyama, a member of the ruling party's committee on trade and industry, said that companies with ties to the Asian superpower should prepare for potential challenges and seek out other markets.
The specifics of the new restrictions are still being determined at the time of this newsletter, but Bloomberg reports that the three major semiconductor powers are planning to ban the export of advanced chip machinery to China.
Aoyama's warning is well-justified, given that China is Japan's top trade partner and has a history of using economic sanctions during political disputes with its neighbours. For example, earlier this month, Beijing suspended the issuance of visas for travellers from Japan due to COVID restrictions on travel from China.
Europe
Netherlands
Bloomberg dropped an exclusive Thursday night, revealing that after months of diplomatic wrestling, the Netherlands has finally agreed to join the U.S. semiconductor ban on China.
Long-time followers of our newsletter would know Netherlands was very clear not long ago that the country will not be pressured by the U.S. when it comes to semiconductor policy on China. In fact, Biden’s sweeping chip bans on China received plenty of pushback from European allies. Just a few months ago, the Netherlands was only banning exports of its most advanced machines to China and leaving the rest wide open.
However, according to the scoop, the Dutch government has had a change of heart. Anonymous sources told Bloomberg that the country will expand its semiconductor ban on China. The Netherlands is set to ban not only the most advanced extreme ultraviolet machines but “at least some” of the less advanced machines to the Asian superpower. The deep ultraviolet machines, while not as advanced, are crucial to chip mass production. The deepened restrictions will clearly cripple Xi’s ambition of achieving semiconductor independence.
Joining the European chip powerhouse is Japan, which followed suit and is poised to ban advanced chip machinery to China. For more information, please see the Japan section.
German
Chinese battery giant CATL is expanding its presence in Europe, establishing a battery cell production line in Arnstadt, Germany. The plant began delivering sample cells in December and aimed to have six production lines running by the end of this year.
CATL is also seeking approval to raise its power capacity from 14 to 24 GWh by June, according to Matthias Zentgraf, president of CATL Europe.
The expansion comes amid uncertainty around Germany-China relations—Berlin is reportedly developing a tougher China strategy. Materials used in production are mainly imported from China, due to established supplier relationships. However, some Chinese suppliers have also set up operations near the Arnstadt plant. CATL hopes to further localize its supply chain and is hosting a supplier conference in Weimar later this year.
The Chinese battery manufacturer will be the largest battery maker in Europe once its second European plant in Hungary reaches a capacity of 100 GWh. Zentgraf said construction will start in the second half of this year and production beginning in 2-3 years.
Indo-Pacific
India
India's Prime Minister, Narendra Modi, was presented with a grim outlook for the bilateral relationship between China and India in the coming year. At a conference with top police officers last week, a confidential research paper was submitted indicating the potential for more military clashes between the two countries along their contested border.
The research conducted by Indian police is based on intelligence gathered by local police and the pattern of India-China military tensions over the years. It shows that Beijing is increasing its military infrastructure in the region.
Since the Tawang clash in December, there has been much talk about the relationships between the two neighbouring countries. I particularly enjoyed reading the analysis by Dr. Jagannath Panda, head of the Stockholm Centre for South Asian and Indo-Pacific Affairs at the Institute for Security and Development Policy.
Panda believes that despite potential attempts to reshape the icy relations, no drastic improvement in China-India ties will appear. "The fear or prospect of small incidents snowballing into an uncontrollable crisis is not preposterous," Panda noted.
One of the arguments leading to that prediction is Xi's tight grip on the Central Military Commission. He thinks the border dispute, also known as the Tibet question(西藏問題), lies at the center of Xi's quest for Chinese "revitalization."
Australia
Chinese President Xi Jinping sent a congratulatory message to Australian Governor-General David Hurley on the National Day of Australia. While the message itself is symbolic, the context is worth noting.
The message was only sent to the Governor-General and not the Prime Minister, which suggests it was not meant to be widely heralded in China. Indeed, only English-language media picked up the message. The Chinese government is clearly sending the message to people outside China.
Beijing has been trying to thaw relationships with Canberra for months now. Just a couple of weeks ago, China's Ambassador Xiao Qian hosted a rare press conference, sending friendly signals on a wide range of issues, including the detained Australian pair and trade bans—two days before China reportedly lifted the two-year coal ban.
Worth-noting headlines from small powers:
Finally, here's a trending Douyin (Chinese TikTok) video for your enjoyment:
In the video, a man is in a movie theatre shouting after the film, The Wandering Earth 2, is screened.
Here’s what he said, roughly.
"Everyone, look at me! I have something to say! China is amazing! Chinese people are amazing! This is our own science fiction! We are awesome!"
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