What does China gain from its South Pacific Engagement?

Wonchibeni Patton, Research Intern, ICS

Image: President Xi Jinping with eight Pacific island countries’ leaders at the 26th APEC Economic Leaders Meeting
Source: Getty Images

The People’s Republic of China (PRC) is the third-largest aid donor to the Pacific Island Countries (PICs), spending around US$1.76 billion in aid towards the region. In its aid programme, the PRC emphasises on equality, mutual benefit and win-win cooperation. On this note, the following paragraphs examine the benefits that the PRC gains from its engagement with the PICs.

Scholars have identified the PRC’s two main interests in the PICs as political and economic. Political or diplomatic interests include decreasing Taiwan’s diplomatic clout and gaining the support of the PICs at multilateral forums, mainly the United Nations (UN). The PRC and Taiwan rigorously engaged in “chequebook diplomacy” in the 1990s, competing for diplomatic recognition from the PICs until 2008 when President Ma Ying-Jeou of the Kuomintang government came to power in Taiwan and led to a diplomatic truce. Before 2019, Taiwan had six diplomatic allies in the region, but this was reduced to four when the Solomon Islands, followed by Kiribati, switched to the PRC in September of 2019. There were several reports that the PRC had baited both countries with promised aid: US$500 million for the Solomon Islands and funds for aeroplanes and commercial ferries for Kiribati

Although the PICs occupy only 15 per cent of the world’s surface, with a cumulative population of around 13 million, they hold about 7 per cent of UN votes. The PRC’s membership in the UN Human Rights Council (UNHRC) has often been questioned, and the PRC is often targeted at the UN for its human rights record. The Xinjiang issue has been raised twice at the UNHRC in the recent past-2019 and 2021. Both were led by countries from the West. However, both times the PRC responded with greater support from its “Like-Minded Group”- a term used to describe a loose coalition of developing states often led by the PRC, Russia and Egypt . In 2020, when the issue of China’s new national security law in Hong Kong was raised at the 44th session of the UNHRC by 27 countries, Papua New Guinea was amongst the 53 countries that backed the PRC. In 2021, when the human rights situation in Xinjiang was raised at the 47th UNHRC session by Canada with the support of 44 countries, a coalition of 69 countries led by Belarus responded in China’s support. The PICs Kiribati, Papua New Guinea and the Solomon Islands were included in the 69. Thus, the PRC has been successful at garnering increasing support from the PICs on issues concerning its interests in international fora.

The PRC’s economic interests in the region include the promotion of China’s Belt and Road Initiative (BRI) and the hunt for raw materials. All the ten diplomatic partners of the PRC in the region have signed up for the BRI. The PICs’ total exclusive economic zones (EEZs) extend across nearly 7.7 million square miles of ocean. This can be beneficial to China’s endeavours in exploring and extracting natural resources. Some of the PICs are blessed with abundant natural resources and raw materials in terms of minerals, metals, fossil fuels, fisheries and wood. A global audit of Pacific resource extraction undertaken by the Guardian’s Pacific Project revealed that China is the largest importer of the region’s natural resources, importing resources worth US$3.3 billion in 2019. In the mining industry, the PRC has invested in seven mining projects across the region, with the largest one being the US$1.4 billion Ramu nickel and cobalt mine in PNG. PNG and Fiji have been the main focus of investments in this field. Other major operations include the Porgera gold mine and the Frieda River Copper project in PNG, the Nawailevu Bauxite mining project and the Vatukoula gold mine in Fiji, and so on. These operations are partly owned and run by Chinese SOEs such as Zijin Mining Group, Xinfa Aurum Exploration and Zhongrun International Mining. In 2019, PNG exported US$2.3 billion worth of oil, metals and minerals to China while Fiji exported US$4.8 million of the same.

The Pacific region is the world’s most fertile fishing ground. China imported US$100 million worth of seafood products from the region in 2019. However, Chinese vessels have also been involved in illegal, unreported and unregulated (IUU) fishing, which has been threatening the region’s revenue sources and food security. Even though the Western and Central Pacific Fisheries Commission (WCPFC) states that China has around 600 licensed vessels fishing in the area, various estimates of the Chinese fleet range between 1,600 and 3,400 vessels. The major exporters of tropical logs in the region are PNG and Solomon Islands, where forestry is a major industry. According to the US Department of Agriculture report, in 2020, Papua New Guinea was the largest hardwood log exporter to China, accounting for 21 per cent of China’s total imports, followed by the Solomon Islands. The Pacific region’s emerging potential as the ‘blue economy’ has also caught Chinese interest. China has started looking into Deep Sea Mining by conducting research projects through the China Ocean Mineral Resources Research and Development Association (COMRA). They have identified polymetallic and cobalt nodules, hydrothermal sulfide deposits and have also produced several deep-sea mining maps in the Pacific. Furthermore, in 2017, China signed a 15-year exploration contract for polymetallic nodules in the Clarion-Clipperton Fracture Zone in the Pacific Ocean with the International Seabed Authority. Although the gains from the Sino-Pacific engagement may not be equal in quantity, Sino-Pacific engagement can be considered a qualitative ‘win-win’. Certainly, China’s primary goals in the region are being met to some degree on both the political and economic fronts.

Establishment Strikes Back in Japan’s Ruling Party Election

Dr. Jojin V. John, Research Fellow, Indian Council of World Affairs

Image: Fumio Kishida Wins Japan Election
Source: News18

Fumio Kishida, former Foreign Minister of Japan, has emerged victorious in the Liberal Democratic Party’s (LDP) presidential election held on 29 September, 2021 and has become the new Prime Minister of Japan. Kishida’s triumph over the charismatic Taro Kono, a former defense and foreign minister and the minister in the powerful administrative reform ministry in the Suga cabinet, is indicative of LDP’s preference for continuity over reforms, resistance to generational change and above all, the political reincarnation of former Prime Minister Shinzo Abe in the role of ‘shadow shogun’.

The election result also proves that Japan is not yet ready for a female leader. However, this year’s election was an improvement on gender terms, having featured two women candidates out of four – former Internal Affairs Minister SanaeTakaichi and former Communication Minister Seiko Noda.

Unlike many democracies, in Japan, it is not the general election but the leadership election of the LDP that decides the leadership of the country. Since its establishment in 1955, LDP had been in power throughout except for brief periods between 1993-94 and 2009-2012. Considering the fragile state that the Japanese opposition finds themselves in today, for all practical purposes, it makes sense to look into the factional debates and competition within the LDP to understand the dynamics in Japanese politics.

The leadership election took a dramatic turn in early September, following the surprise announcement of PM Suga, that he is not seeking a second term. In the first round of the election in which both LDP Diet members and party workers voted, Kishida came on top with one vote ahead of Kono, while Takaichi and Noda came third and fourth. As no candidate could get a clear majority, the contest went into a run-off between Kishida and Kono, during which the former secured a clear victory. 

Four important factors that will have long-term implications for Japanese politics were at play in the election. First, the results meant a victory for the conservative elements of the party over the reformist. While more appealing to the public and the party workers, Kono, who is known to be a maverick in Japanese politics, has not been the favourite of the party’s old guard. He represented a platform that called for reform within the party and radical change in the policy direction of the government. His support for LGBT rights, separate surname for married couples, pension reform and review of the nuclear energy policy is considered ‘too’ reformist even for LDP’s moderate conservatives. On the other hand, Kishida, who stressed stability and continuity without directly challenging the directions set by the ‘Abe/Suga administrations’ over the last decade, had no difficulty getting the backing of party elders.

Initially, after young lawmakers of the party rallied around free voting, it was widely anticipated that it would weaken the power of factions, thus benefitting Kono, who is popular among the new generation lawmakers. Therefore, Kono’s defeat also implies the limitation of the generational change in Japanese politics and the staying power of the factions led by veteran politicians. 

Third, election results highlight the political genius of Shinzo Abe and the influence that he will command as the kingmaker in the Kishida administration going forward. By offering his support to the hardliner Takaichi, who was considered as an outlier in the early phase of the campaign, Abe significantly changed the political equations. The move was critical in stopping Kono from gaining a clear majority in the first round and pushing the contest into a run-off.

Fourth, policy debates during the election also reflect LDP’s shift towards a more hard-line approach on defence and national security issues. However, Kishida, who used to call himself a ‘dove’ on foreign and security matters, styled himself as a realist and pragmatist to woo the party hardliners.  With Kishida taking a more hawkish approach to China, revision of the constitution and the need for Japan to acquire first-strike capability, Kono appeared to be soft. For Kishida, who assumed power on 4 October  during an emergency session of the Diet as the 100th Prime Minister of Japan, the immediate task is to steer the party to victory in the lower house election scheduled for next month. This will be crucial for him to seal his position as the party head and the prime minister for the next three years and to forestall Japan heading into a new phase of political instability.

A key component of China’s strategy in the Taliban-ruled Afghanistan is to make the Indian role “inconsequential”

Hemant Adlakha, Associate Professor, Jawaharlal Nehru University, and Vice Chairperson, Institute of Chinese Studies

Image: Afghanistan News – China-Pakistan-Taliban nexus
Source: youtube.com

What does China-Taliban “bonhomie” in a Taliban-ruled Afghanistan indicate for India? Numerous speculative analyses have been voiced in the past few months in India, and many more will follow in the coming days. So far, disappointingly, the usual cliched, routine and unimaginative interpretations are being offered, i.e., now is the time India should discard its policy of non-alignment; in addition to the Taliban takeover, a friendly, pro-Beijing Taliban is not only a foreign policy setback but also a blow to India’s national security concerns; it will mean India being pushed into deeper conflicts with both Beijing and Islamabad, and so on.

Let us view the real situation from another perspective. How should India measure China’s advantage(s) under a pro-Beijing regime in Kabul? Should India be anxious/concerned over the so-called China, Russia, Iran and Pakistan ‘new Quad’? Why is there a broad consensus among China’s scholars that an “ambitious” India must be rendered “inconsequential” in an Afghanistan full of uncertainties? Why are analysts in Beijing asserting that because Afghanistan is a small part of India’s strategy, the US folly in Afghanistan will not deter New Delhi from going ahead and upgrading relations with Washington into “a quasi-alliance relationship”?

Following the chaotic US troop withdrawal from Afghanistan, there has been a “tsunami” of editorials, op-ed pieces and commentaries in the Chinese offline and online media. Interestingly, on the popularity scale, the opinion pieces written by the Chinese scholars and analysts have been in the range of 10,000 to over 100, 000 clicks. Indeed, most of these articles and opinion columns are focused on or highlight the rapidly changing political situation and the stakes for China under the Taliban-ruled Afghanistan. However, a few weeks ago, an article uploaded on the website of the popular digital guancha.cn showed a surprisingly and unusually large number of clicks – as high as close to 400,000! 

Image: Afghan Taliban on China’s side: should India be worried?
Source: thequint.com

What attracted such a huge number of readers to the article? Possibly, two factors. First, the popularity and huge-swell of readership for its author – Francis Fukuyama; second and more important reason is the title of the article in the Chinese version: “Biden says US troop withdrawal is to prepare to better deal with China and Russia Challenge. I hope Biden is serious.” The Chinese translation of Fukuyama’s write-up was based on his article in the Economist, three days before, titled “Francis Fukuyama on the end of American hegemony.” The article in Chinese also generated over six hundred “comments” from the readers – an unusually high number.

Interestingly, just like Fukuyama’s commentary attracted reactions from the Chinese readers from wider society, within hours of the US completing the withdrawal, an article entitled (in Chinese) “India suffers a severe strategic blow in a changing Afghanistan” clicked nearly 200,000 visitors. Edited by guancha.cn staffer Chen Sijia, the article in Chinese was based on an Indian analysis by a former Lt. Gen. on a digital news and current affairs platform, entitled “India backed the wrong horse in Afghanistan, and has gone into a strategic sulk now.” The Indian analysis claims “India’s actions in Afghanistan stem more out of pique for the triumph of radical Taliban and its mentor Pakistan, and less due to the lack of strategic options.”

However, the guancha.cn picked up theIndian article for entirely different reasons – reasons perhaps India’s strategic affairs or China-watcher community are yet to pay attention to.

Image: Afghanistan crisis: Taliban and China nexus threatens
Source: theweeklymail.com

First, though true that after the US initiated the peace talks with the Taliban in Doha in 2018, all major countries involved in Afghanistan except India have engaged with the Taliban to safeguard their respective interests. However, not unsurprisingly, as soon as Washington disclosed President Trump was contemplating a possible full troop withdrawal from Afghanistan, Beijing instantly swung into action and began holding consultations with Islamabad on its future Afghan strategy. A sputniknews.cn editorial (in Chinese) had then commented: “Following reports in the US media of the [Trump] administration planning to vacate half of its 14,000 forces in Afghanistan, the US plan to withdraw troops has emerged as a major agenda for China and Pakistan.” 

Second, in December 2018, Hua Chunying, the Chinese spokesperson denied at a routine foreign ministry press briefing that the hurriedly called meeting between the foreign ministers from China and Pakistan in the Chinese capital Beijing was to discuss the issue of the US withdrawal from Afghanistan. However, she did admit the two foreign ministers met to deliberate on the “most recent changes” in Afghanistan. It is pertinent to mention, China has since been proactively and carefully recalibrating its moves – primarily aimed at safeguarding its investments and ongoing project in region, especially in Pakistan’s CPEC (China Pakistan Economic Corridor) region – together with Pakistan and both the Taliban forces and the Kabul government. As it was revealed in a recent report in the semi-official Global Times, “The all-weather strategic cooperative partnership between China and Pakistan enabled the two countries to act in coordination on the Afghan situation, bringing about positive changes to the region.”

Third, it is important to point out what are key components in China’s strategy to safeguard its investments in Af-Pak border region and in the CPEC under the Belt and Road Initiative? Two factors. First, to keep India out of Afghanistan; second, if at all India manages to adjust its policies and restores contact with the Taliban, make the Indian role under the Taliban ruled Afghanistan inconsequential, as was observed by a now retired senior PLA colonel in a guest column in the NYT. Marginalizing India in the post-US era Afghanistan will result in more than one advantage for China. Namely, the Indian opposition to BRI’s signature CPEC initiative will become totally ineffective; this will further facilitate China to smoothly expand Beijing’s efforts in financing and building infrastructure across the region, which in turn will extend the Belt-and-Road access to markets in the Middle East; and given the tense relationship between India and Pakistan, the Taliban-Pakistan-China “troika” will ensure India is not allowed to create trouble in both Pakistan’s troubled Baluchistan region and plot and execute terrorist strikes especially targeting the Chinese construction projects and the Chinese personnel, as both China and Pakistan have been accusing India of “engineering” recently.

Talibs call China ‘friend’ as Beijing-Islamabad-Taliban nexus cements in Af
Image: English.lokmat.com

It is in this backdrop, the increased relevance of the Taliban commitment made to Beijing recently must be understood. At the same time, it is important to note that Beijing has already started downplaying the significance of the recent meeting between the Indian ambassador to Qatar and Sher Mohammad Abbas Stanekzai, the head of the Taliban’s Political Office. Reacting to the outcome of the meeting held in Doha on last Tuesday, a news daily in Beijing commented: “No information suggests that the Taliban has shown [to India] the sort of goodwill it has demonstrated to China.” 

Furthermore, a Taliban spokesperson Muhammed Suhail Shaheen told media earlier that “if India comes to Afghanistan militarily and has presence there, that will not be good for them.” Furthermore, Qian Feng, director of the research department at the Beijing’s prestigious Tsinghua University has said in an interview: “India’s past strategy has pushed itself into embarrassment. It cannot make a U-turn in its Afghan policies, neither can it cast aside geopolitical influence of the US and its Western allies.”

Standing up to China-Pakistan nexus
Image: openthemagazine.com

Finally, in Beijing’s view, India must blame itself for the mess it is in following the chaos left behind by the US in Afghanistan. According to the Global Times, if India designs its regional policies simply on the basis of countering China or pandering to the US, these policies are bound to fail. Lan Jianxue, head of the Department for Asia-Pacific Studies at China Institute of International Studies, told the Global Times “To some extent, this is going to jeopardize India from keeping influence in the region.”          

This article is revised version of an earlier write-up published by the web edition of the Indian Defense Review

China’s Journey to Vaccine Hegemony

Swapneel Thakur, Research Intern, ICS

Source: Wall Street Journal, 2021

Since the beginning of the COVID-19 pandemic, China has continued to control the spread of the virus, successfully and effectively. A country of 1.4 billion people, more than the combined the populations of Europe and the United States, has been reporting some clusters of cases and has been able to prevent widespread community transmission. Although much of this success could be attributed to its experience gained from the SARS Epidemic in 2002, China’s disease control strategy featured a balanced combination of both prevention and protection.

Soon after COVID-19 first emerged in December 2019, Chinese scientists were able to identify the virus and share the genome sequencing data internationally. By the end of the January 2020, Chinese doctors had already categorised the clinical symptoms of COVID-19 patients, risks of person to person transmission, genomic characteristics, and the epidemiology. This robust foundation of research was backed by political commitment from the very top to use science to tackle the outbreak decisively. For instance, China’s National Health Commission sent three groups of national infectious disease experts to Wuhan at the beginning of the outbreak to investigate the risks and transmissions of the virus, to which their recommendations for a lockdown immediately implemented. The government was also quick to respond to the advice given by academic scholars such as Cheng Wang, the President of the Chinese Academy of Medical Sciences. His idea of Fangcang shelter hospitals, or temporary hospitals built by converting existing public facilities like stadiums became a key strategy for promptly providing large number of hospital beds and appropriate health care to patients suffering from the disease. However, its prevention control strategy would not have been possible without the broad range of community engagements and solidarity that was seen at an unprecedented level during the COVID-19 outbreak. Control measures that could curb individual freedoms like mandatory wearing of mask in public areas and social distancing were readily accepted by the public, unlike in the Western countries where anti-masking and anti-lockdown protests were quite common. Thus, after achieving the primary objective of limiting the spread of the virus, China’s next strategic goal was to successfully balance these immediate challenges with preventive measures, namely, providing safe and effective vaccines for protecting the population from further infections.

While the US and most Western countries followed a market driven model based on advanced purchase agreements, China adopted a state driven model which leveraged both political mobilisation and the use of economic instruments. Responding to an outbreak of a new infectious disease by solely relying on market mechanism can be expensive, besides being fraught with risks. Furthermore, market-based solutions could increase the probability of slowing down vaccine research due to high levels of uncertainty. For instance, despite having early access to the virus’s genome, several Western pharmaceutical companies continued to dedicate greater share of resources to develop lucrative treatments for existing chronic diseases such as cancer than to counter this infectious disease which could have global ramifications. Janssen and Pfizer’s COVID-19 vaccine research began only when large scale infection was imminent in Western countries during late February.

With vaccine research starting as early as in January 2020, China’s Ministry of Science and Technology (MOST) had already launched emergency research projects by February to accelerate vaccine development. It went on to sponsor five technological roadmaps and 12 vaccine candidates that included private sector giants and nascent start-ups. In order to coordinate policy goals across agencies and to mobilise resources promptly, the government had also established a COVID-19 Task Force comprising senior officials from the National Medical Product Administration (NPMA), the MOST and other concerned departments. The Task Force was affiliated to the Joint Prevention and Control Mechanism of the State Council and reported directly to the Vice Premier of China. Under the Task Force’s direction and guidance, the vaccine research program featured multiple players collaborating to maximise their joint performance. For instance, due to the long-standing relationship that the MOST shared with domestic pharmaceutical companies, the Chinese Government was quickly able to identify enterprises that were capable of developing COVID-19 vaccines during the public health emergency. These enterprises were then supported with efficient allocation of resources required for vaccines development across the Chinese Academy of Sciences, universities, the army and the state-owned enterprises. In addition, the Task Force had also directed the NPMA to modify its procedure in accordance with China’s Vaccine Administration Law to streamline the inspection and review process for vaccines and accelerate market approval.

As of now, four vaccines have been approved in China and in at least one foreign country. Sinopharm’s BBIBP-CorV, Sinovac Biotech’s CoronaVac, CanSino BIO’s Convidecia and ZhifeiLongcom’s ZF2001 make up the most of China and its allies arsenal in the fight to defeat COVID-19. The World Health Organisation (WHO) had also given emergency approval to Sinopharm vaccine in May and the Sinovac Biotech vaccine in June 2021 With the help of government resources and institutions such as Chinese Academy of Sciences and Academy of Military and Medical Sciences, Chinese manufacturers had already started increasing production capacity when the vaccines were in early stage of development. As early as in April 2020,Sinopharm had established production lines in Beijing and Wuhan with an annual capacity of 300 million doses and with plans to eventually export 300 to 500 million doses to over twenty countries. Similarly, Sinovac and CanSinoBIO increased their production capacities to 300 million and 200 million doses respectively. This explains why Chinese companies have been very optimistic about reaching an annual production capacities of more than a billion doses in 2021. For instance, earlier this year both Sinovac and Sinopharm had declared that they were capable of producing more than a billion doses annually. This expanded capacity has allowed China to meet huge domestic demands as well as to fulfil orders from abroad. With Chinese vaccine developers conducting Phase III trials in various countries in Asia, Latin America and Africa, China has emerged as one of the leading suppliers of COVID-19 vaccines in the world.

Such vaccine developers would usually collaborate with local pharmaceutical companies or health departments which helped recruit volunteers, coordinate physical and institutional resources and conduct trials in return for preferential pricing, delivery time and technology transfer. This led to China extending support to more than 80 developing countries. The government has been actively encouraging companies to export independently to other countries in its effort to ensure sufficient supplies of COVID-19 vaccines. Some of the agreements entered into by Chinese companies included an additional clause stating that if a local pharmaceutical company has hosted the clinical trial, the country itself is designated as partner in manufacturing and distributing vaccines for domestic use and export. This explains why China has been supporting overseas production bases of its vaccines in countries like Brazil, UAE, Egypt, Indonesia, Turkey Mexico and Pakistan. While UAE would be producing Sinopharm’s vaccine under the name of Hayat Vax, Brazil, Indonesia, Turkey and Egypt have been manufacturing Sinovac Biotech’s vaccines. Mexico and Pakistan have also started producing CanSinoBIO’s vaccine via an exclusive production line in their respective countries.

As one of the major producers of COVID-19 vaccines in the market, China has reshaped its position as a supplier of affordable vaccines to several developing countries in the world. By investing in research and production capabilities right from the early days of the pandemic, Chinese companies have not only taken major steps to mitigate the severe shortages of vaccines in the developing world but has also provided a viable alternative to expensive vaccines offered by pharmaceutical giants like the Pfizer and Moderna.

The author is thankful to his mentor, Dr. BiswajitDhar, Professor, Centre for Economic Studies and Planning School of Social Sciences, Jawaharlal Nehru University.The views expressed here are those of the author(s), and not necessarily of the mentor or the Institute of Chinese Studies.

E-RMB: A Challenge to Mitigate Trust and Surveillance

Kunal Nitin Timbalia, Research Intern, ICS

Source: China-briefing.com

Digital RMB (hereinafter, E-RMB) is the digital version of China’s paper currency, the conversion of physical currency into a digital form. In the last 40 years, China has rapidly developed and transformed its economy into the second-largest economy globally. China wants to enhance this economic status and aspires to become the largest economy in the world. To achieve the goal, China is working with great perseverance on all fronts of the economy. The digital currency is one such examples. Since 2014, the People’s Bank of China (PBOC) has been exploring the chances of digitization of RMB to boost their economy. 

E-RMB is issued by the PBOC and is mainly a substitute to physical currency and will coexist with it. Further, the purpose and use of E-RMB are divided into two kinds: wholesale and retail. Wholesale E-RMB is mainly issued to institutions like commercial banks and would primarily serve large value settlements. On the other hand, retail E-RMB is issued to the public for daily transactions. E-RMB is a legal tender, individuals in China cannot refuse it and the PBOC facilitates its issuance.

Between 2014 and 2016, the PBOC formed the digital currency research group and initiated their research on the concept of E-RMB. In 2017, the PBOC started the E-RMB development project. In this project, large commercial banks, telecom operators and internet companies with high technological development were selected to participate and help the PBOC develop and test E-RMB. At the end of 2019, PBOC launched E-RMB pilot programs in Shenzhen, Suzhou, Xiong’an and Chengdu. In 2020, Shanghai, Hainan, Changsha, Xi’an, Qingdao and Dalian were also included in the distribution of E-RMB. PBOC’s Whitepaper titled “Progress of Research & Development of E-CNY in China” confirms that, as of 30 June, 2021, E-RMB has been applied to over 1.32 million scenarios, covering utility payment, catering service, transportation, shopping, and government services. If all goes according to the plan, it is predicted that China would become one of the dominant economies to offer a national digital currency.

As the usage of digital currency is rapidly growing, the circulation of cash in retail payments has been on a decline. E-RMB gives the advantage to people who do not have bank accounts in Chinese banks; for instance, foreigners travelling to China can open E-RMB wallets to use for daily transactions without opening a domestic bank account. E-RMB will help the citizens with a new compatible way of payment and diversify modes of payment and make the transactions more efficient and safer. China also aims to use E-RMB in cross-border payments to promote RMB internationalization. In 2020, with more than 750 million people in China purchasing consumer products online,  as per Goldman Sachs, E-RMB could be used by one billion people in the coming decade.

In the recent white paper of PBOC, ‘managed anonymity’ has been proposed as an extra security measure. PBOC while explaining the – ‘managed anonymity’ concept, stated that; “E-CNY follows the principle of anonymity for small value and traceable for high value, and attaches great importance to protecting personal information and privacy.” That means the small transactions will be anonymous and significant transactions will be traceable. Further, PBOC explains that to comply with the requirements of Anti-money laundering, it is vital to guard against the misuse of E-RMB such as tele-fraud, internet gambling, money laundering and tax evasion.

In the current times, Chinese consumers are increasingly using third-party mobile and online payment platforms. PBOC controls these transactions and data. But now through E-RMB, PBOC will have intensive control over all sorts of transactions. While PBOC monitors all the private sector transactions, the private sector has relatively low trust in privacy protection in anonymous payments.  Research shows that mobile users in China are worried about sharing excessive personal information through digital wallets.

The E-RMB might facilitate the Chinese government to integrate data, collect and generate more detailed pictures of individual users’ buying patterns. It will help the Chinese government to identify patterns in financial transactions. Hence, E-RMB may allow the Chinese government to use it for public surveillance. Further the government may collect data of its citizens residing abroad or businesses that will use the E-RMB. China already has authoritative surveillance with facial recognition technologies, big data analytics technologies, and artificial intelligence.

The Chinese government reportedly carries out surveillance of all the Chinese citizens indiscriminately. As the users of E-RMB will be sharing personal data with the regulators, it becomes easier for the government to carry out surveillance. It is observed by the Washington Post that,  as part of the social credit system, the Chinese Communist Party (CCP) blacklists untrustworthy individuals, and the E-RMB could be connected to this system. The use of E-RMB may give more power to the government and can monitor users. As PBOC argues, if they find any E-RMB or account involved in suspicious transactions they can immediately freeze the account. The Chinese government also claims that post-pandemic; E-RMB will help improve the money supply and boost their economic recovery.

In today’s technologically advanced world, where data plays a critical role, the state controls citizens’ data; and can use it for its benefit – to govern or control. Since China has acclaimed technological superiority in data surveillance, the government can trace all the transactions carried through E-RMB. Moreover, China’s aim to internationalize E-RMB may have larger security impact. The E-RMB may help the Chinese state to carry out scrutiny of data at an international scale as well. The issue here is the trust, and the question to be investigated further is: how the Chinese government mitigates this problem in the coming future.

The author is thankful to his mentor, Aravind Yelery, Senior Research Fellow (Associate Professor Grade) at the HSBC Business School, Peking University, Beijing/Shenzhen, for his invaluable guidance and support in writing this article. The views expressed here are those of the author(s), and not necessarily of the mentor or the Institute of Chinese Studies.

How Nepal Turned to China to Fill its COVID-19 Vaccine Shortfall

Shreha Gupta, Research Intern ICS

Image: Vaccine diplomacy and Nepal
Source: Griffith Asia Institute

Nepal’s vaccination drive against COVID-19 began on 27January, 2021 with the Oxford-AstraZeneca vaccine manufactured by the Serum Institute of India (SII) under the brand name Covishield. The campaign was launched with the one million doses of Covishield that India had provided under grant assistance in sync with its ‘Neighbourhood First’ Policy and ‘Vaccine Maitri’ Initiative.

On 17 February, 2021, Nepal signed a contract with SII and made the advance payment to procure two million doses of Covishield, out of which only a million doses were delivered.  According to a report by Reuters, India had put a temporary hold on all major exports of the AstraZeneca Coronavirus shot made by SII to meet rising demands at home amid the raging second wave of Coronavirus. The second phase of the vaccination drive that began on 7March, 2021 was left in limbo, despite the country becoming one of the first in the world to launch the campaign.

However, India denies that restrictions were imposed on vaccine exports and maintained that it was trying to prioritise the demand at home. “India has not enforced any restrictions on exports of Covid-19 vaccines,” said Arindam Bagchi, spokesperson for the Ministry of External Affairs of India during the weekly press briefing on 2April, 2021. “We will export vaccines taking into account the domestic demand”, he added.

Following the inability expressed by SII to provide vaccine until the end of this year, the COVAX facility which is a vaccine pillar of the Access to Covid-19 Tools (ACT) Accelerator in partnership between Coalition for Epidemic Preparedness Innovations (CEPI), the Global Alliance for Vaccines and Immunization (GAVI), UNICEF and WHO, suggested that Nepal should explore appropriate alternatives apart from the Covishield vaccine.

Nepal began looking towards China to fill its vaccine shortfalls amid uncertainty over COVID-19 vaccine supplies from India. China had donated 1.8 million Covid vaccines developed by Sinopharm in two different grants of 800,000 doses and 1 million doses. On 29March 2021, Nepal received China-gifted 800,000 doses of vaccine as per the commitment of providing 500,000 doses made on 5February 2021 during a telephonic conversation between the foreign ministers of China and Nepal. Later, China decided to provide an additional 300,000 doses which increased the grant assistance of the COVID-19 vaccine for Nepal to 800,000 doses.

On 1June 2021, Nepal received another consignment of 800,000 doses of Vero Cell vaccine developed by the Chinese state-affiliated pharmaceutical giant Sinopharm, out of the 1 million doses of vaccine which were earlier announced to be provided on a grant basis as per the commitment made during a telephonic conversation between presidents of the two nations on 26May, 2021. The remaining 200,000 doses of the Vero Cell vaccine has been provided to Nepal by the Government of the Tibet Autonomous Region of China, Nepal’s Ministry of Foreign Affairs stated in a release.

Nepal has also bought four million doses of the Vero Cell vaccine from China under an agreement with a non-disclosure clause, of which 800,000 doses have been received on 9 July 2021. On 16July, Hou Yanqi, Chinese Ambassador to Nepal informed the newly-appointed Nepalese Prime Minister Sher Bahadur Deuba that China will provide additional 1.6 million doses of the COVID-19 vaccine to Nepal in grant assistance. With this announcement, China has become by far the largest vaccine donating and exporting country to Nepal.

Ashok Pandey, Associate Research Fellow in Policy Research Institute mentioned in his Research Report that vaccine donations made by India helped to strengthened Nepal-India relations but the delay in the procurement thereafter and news of corruption in vaccine procurement began to reverse the gains. He also mentioned that the gesture of one million vaccine donations from China was widely appreciated in Nepal at a time when the country was in dire need of the vaccine.

Beijing’s vaccine diplomacy will benefit its competition for influence in South Asia where India has traditionally been the dominant power. According to an article published in Voice of America (VOA), analysts have pointed out, “China moves in to fill the gap left by India, Beijing’s “vaccine diplomacy” could give it leverage in the strategic Indian Ocean region, where it has been pushing its Belt and Road initiative that aims at building infrastructure projects across many countries”.  

Michael Kugelman, the Deputy Director of the Asia Program and Senior Associate for South Asia at the Wilson Center pointed out that China views its vaccine diplomacy as an image-building tactic and India’s suspension of vaccine exports is a strategic opportunity for China.

In his article published in The Himalayan Times, retired Nepali Army lieutenant colonel Ashok Kumar Khand mentioned that the economic giants like India, China and the United States are “trying to regain a foothold in the countries of their interest or influence in the name of humanity through vaccine donations”. According to him, “the vaccine donation gives China a key to deter India’s monopolistic political influence over Nepal, counter the Indo-Pacific Strategy of the United States and the QUAD policy, and push the ambitious BRI project forward”. He added, “Winning the Nepali sentiment for India, aligning the Nepali view with that of India against China’s expanding influence in South Asia, including the Belt and Road Initiative (BRI), and control of Nepali politics from behind the curtain could be the hidden agenda behind India’s vaccine diplomacy”.

Prime Minister Narendra Modi held a telephonic conversation with Prime Minister Deuba on 19 July 2021 and assured early supply of covid vaccine to Nepal but India’s image as a vaccine-giving nation and its soft power gains has been dented and could be further damaged if there is a long delay in exporting vaccines. As the world’s largest producer of vaccines, India is expected to ramp up enough capacity to resume vaccine deliveries to other countries in addition to meeting the requirements at home. Michael Kugelman pointed out that New Delhi has the opportunity to reassert itself further down the road and India has an inherent comparative advantage over China because it is the world’s top manufacturer of vaccines. Another advantage India’s locally produced vaccine has over Chinese vaccines is its affordability. Although the price of the Chinese vaccine has not been disclosed owing to the non-disclosure clause, it is said to be around $10 per dose whereas, Nepal bought the jabs from the SII at $4 per dose.

India had an early movers advantage because it moved in with the commitment of initial large supplies but it lost ground due to the inability to provide vaccines either on a grant basis or fulfil commercial commitments made by SII. Nepal gave priority to vaccines produced in India because of reasons like, logistics, pricing, existing storage and transportation facilities in Nepal and India’s assurance to facilitate procurement but India’s inability to provide vaccines have created a vacuum that was filled in by China. According to Harsh Pant, Director Studies and Head Strategic Studies program at the Observer Research Foundation in New Delhi, “Given that this crisis will be with us for the foreseeable future, certainly there is going to be a sense of China becoming a very important player for many of these countries if India is not able to pick up some slack after a few months once things stabilize”.

Nepal is still far from achieving the required inoculation for its population. According to the latest data (14th September 2021) of the Ministry of Health, 5243236 people or 17.4% of Nepal’s 30 million population have been fully vaccinated. The lost ground could still be retrieved if India can ramp up its vaccine producing capacities and resumes providing vaccines to Nepal. It will be in India’s interest to prioritize inoculating the Nepali population because the two countries share an open border and uninoculated people crossing the India-Nepal border on a daily basis could surge the coronavirus cases in both countries. In addition, India should also take lessons from the 2015 border blockade which pushed Nepal into China’s lap and be cautious about China’s attempt to fill the gap in vaccine shortage.

************************************************************************The author is thankful to her mentor, Ambassador Ashok K. Kantha, Director, Institute of Chinese Studies and former Ambassador of India to China, for his invaluable guidance and support in writing this article. The views expressed here are those of the author(s), and not necessarily of the mentor or the Institute of Chinese Studies.

Seven Months post-Coup, Decoding China’s Myanmar Policy

Jelvin Jose, Research Intern, ICS

Image: President Xi Jinping meets with Myanmar Commander-in-Chief of Defense Services Min Aung Hlaing in Nay Pyi Taw, Myanmar.
Source: China Daily

Seven months have passed since the Tatmadaw (Myanmar’s military) under General Min Aung Hlaing captured power in a military coup on 1 February 2021. China is one of the few major countries that did not condemn the coup. The Chinese response has continued to be carefully crafted to evade damaging its core strategic, security, and economic interests. Beijing’s official stance from the beginning has been that the coup is Myanmar’s internal affair, and the international community should refrain from “inappropriate intervention” while respecting Myanmar’s sovereignty.

Chinese Response to the Coup

Despite the widespread international opinion against the coup, Beijing and the Kremlin intervened to block the United Nations Security Council’s (UNSC) attempted move to condemn the coup in the immediate aftermath of its occurrence. In April, Chinese State Councilor and Foreign Minister Wang Yi communicated with several ASEAN leaders such as of Malaysia, Indonesia, Philippines, and Singapore. Among the “Three Avoids” Wang emphasized to resolve the crisis were “inappropriate intervention by the United Nations Security Council,” undermining Myanmar’s sovereignty and external support to the popular unrest for “private gains” further stoking the crisis.

As per reports, the harsh language in a UNSC draft statement on Myanmar of March prepared by the U.K., including the direct reference to the coup and the threat of international action, was removed on the demands of China, Russia, India, and Vietnam. Similarly, on 18 June, China was among the 36 nations (including India and Russia) that abstained from voting on the UN General Assembly resolution against the overturn of Myanmar’s democratic government. The resolution was adopted by an overwhelming majority of 118 against one.  In August 2021, the Chinese State Counselor and Foreign Minister Wang Yi participated in an ASEAN video conference pledging humanitarian assistance to Myanmar. While expressing concern over Myanmar’s overall situation and supporting ASEAN’s efforts to find a peaceful resolution to the crises, Wang, who carefully refrained from mentioning the coup, steadfastly maintained the position that this was ultimately Myanmar’s internal affair.

Decoding Chinese Response: Beijing’s Policy Imperatives in Myanmar

Over the years, Beijing has been the most prominent economic, political and military support pillar of Myanmar’s military junta when that regime has attracted international outrage and isolation. Nay Pyi Taw’s decades-long international isolation and sanctions, and the junta’s consequent reliance on China have largely helped Beijing carve out a dominant space in that country (along with other factors too, no doubt). Nevertheless, Beijing’s interests in backing the military had somewhat reduced since 2011, mainly after it found an alliance of greater convenience with Suu Kyi. After all, the military has traditionally harboured deep suspicion about Beijing’s intentions concerning Chinese support to various Armed Ethnic Organizations (EAO’s).

Nay Pyi Taw’s international isolation resulting from the military takeover is likely to help China reduce the strategic and economic competition it faces and diminish strategic, border security, and economic challenges it has recently encountered from Myanmar’s increasing international engagements, particularly with the Western countries and U.S. allies whom Beijing see as foes. However, while considering the overall scenario, Beijing does not view the present military takeover as unequivocally conducive to securing its interests in Myanmar and thus it is unhappy about the coup.

Two major reasons lead us to such a conclusion. First of all, “stability” is at the core of Chinese interests in Myanmar. Although the fall of democracy does not matter for Beijing, the unrest, chaos, and subsequent instability resulting from the coup gravely threaten Chinese economic interests. A peaceful, economically vibrant, and stable Myanmar is necessary to reap the benefits of the already huge Chinese investments in Myanmar, such as in the Kyaukpyu port project and Kyaukpyu special economic zone. More robust international investments and resultant economic gains would, predictably benefit the Chinese infrastructural and connectivity projects, even though, Beijing may not politically welcome investments from rivals such as Japan and India. In addition, the coup has also brought in the additional risk of alienating Myanmar’s civilian population as some popular sentiment has turned against Beijing for backing the military takeover.

Secondly, the coup does not provide any significant strategic or security advantages to Beijing but erodes them to some extent. Myanmar’s generals remain well aware of how crucial Beijing’s tacit support for them to remain in power. Thus, they may well try to please the Chinese leadership, by showing them the coup has not damaged Chinese interests in the country and that the military rulers remain highly accommodative of its interests. However, the present military leaders do not seem to be granting Beijing the degree of strategic and economic leeway in Myanmar that it had been receiving from previous military rulers. This is particularly true in the light of the fact that countries such as Japan, South Korea, and India have also remained unwilling to sever ties with Myanmar’s military regime.

Meanwhile, the continuing political instability and chaos in the country puts China’s border security – one of Beijing’s crucial objectives in Myanmar – at risk. China is wary of the prolonged political unrest in Myanmar as it fears that it would provide an excuse and opportunity for its rivals such as the U.S. and its allies to continuously interfere in Myanmar in a way that Beijing believes may risk China’s national security. This is of particular concern for the Chinese leadership considering China’s porous border with Myanmar in the Yunnan province.

Beijing knows very well that the Tatmadaw is a fiercely nationalistic organization, suspicious of China’s engagements and backing to the EAO’s, which the military sees as a peril to the country’s unity and integrity. Although the coup has increased Tatmadaw’s reliance on Beijing for tacit political and military support, which no other country except Russia is able to provide at the moment, Beijing is aware that the Tatmadaw will not hesitate to play Beijing against its other rivals like New Delhi or Tokyo if necessary. On the other hand, the partnership with the civilian government under Suu Kyi had, over time, become more convenient for Beijing than it had expected. Dealing with the civilian government also was helpful for Beijing to evade international criticism and image loss from backing the military.

Beijing equally looks forward to the return of a post-coup democratic mechanism if possible since the Chinese leadership also sees such an arrangement as more facilitating to the achievement of its interests. However, China’s tacit backing to the Tatmadaw leadership is aimed at damage limitation. Beijing does not want to sponsor democracy in the South East Asian country at its cost. Instead, China actively encourages ASEAN’s efforts to restore peace and democracy in Myanmar. Through this, Beijing intends to send a message that it is in support of Myanmar’s democratic transition. Moreover, Beijing, which views the U.S. and Western engagement with Myanmar as a threat, does not have such levels of threat perception regarding ASEAN. Altogether, China’s Myanmar policy today is guided by the sole mantra of best securing its own medium-term national interests.  

The author is thankful to his mentor, Ambassador Vijay K. Nambiar, former Ambassador of India to China and UN Secretary General’s Special Advisor on Myanmar, for his invaluable guidance and support in writing this article. The views expressed here are those of the author(s), and not necessarily of the mentor or the Institute of Chinese Studies.

China’s Rendezvous with the Taliban: An Uneasy Alliance

Rangoli Mitra, Research Assistant, ICS

Image: Chinese State Councilor and Foreign Minister Wang Yi meets with Mullah Abdul Ghani Baradar, political chief of Afghanistan’s Taliban, in Tianjin, China July 28, 2021.
Source: Reuters

As America’s war in Afghanistan comes to a tragic end and the country experiences widespread chaos following the abrupt and complete collapse of the Afghan army and government in the face of the onrush of Taliban forces, China, an increasingly assertive power in the neighbourhood, appears to have chosen to deal with the emergent crisis in an unusually pro-active though precarious manner. Shortly after the fall of the entire country to the Taliban, Chinese Foreign Ministry spokesperson Hua Chunying told the media that the Chinese have noted that the Afghan war has come to an end and the Taliban have said that they will “negotiate the establishment of an open and inclusive Islamic government”. Working in tandem with its “all-weather” friend – Pakistan, China’s endorsement of the totalitarian Taliban government has sounded an alarm around the world, particularly, in the West; however, this is not entirely shocking as China seeks urgent political stability in Afghanistan.

China perceives the Taliban as more than just a religious extremist group and a real political force. Over the years, China was never convinced that the Taliban could be destroyed by military means, and in line with this strategic calculation, China had cautiously engaged with the group keeping future objectives in mind. Even though China has termed Afghanistan as the ‘graveyard of empires’ and never sought to entangle itself in the quagmire of the ‘great game’, it has been worried about the presence of the United States (US) on its Western border. As a ‘new great game’ begins, China has made its intentions clear- it will pursue a relationship with the Taliban for achieving its own ends. Thus, the central purpose of the present analysis is to explore China’s relation with the Taliban along with an attempt to understand the particular type of role China wants to play in Afghanistan.

A Historical Overview of China-Taliban Relations

Historically, Afghanistan was on the periphery of China’s diplomacy and China did not have a strong influence there. In 1993, one year after the Afghan communist regime collapsed, China evacuated its embassy  amidst the violent struggle then taking place. China did not establish an official relationship with the Taliban who had seized power in 1996. However, it is interesting to note that efforts to establish a relationship with the Taliban dates back to 1999. In December 2000, China’s ambassador to Pakistan, Lu Shulin, even met the Taliban’s leader Mullah Omar in Kandahar. It is speculated that Mullah Omar assured the Chinese that the Taliban would not host anti-Chinese militants in Afghanistan. For the Chinese, threats emanating from Uighur militancy and the East Turkistan Islamic Movement (ETIM) have remained a primary security concern.

After it become clear that the US military surge in Afghanistan in 2010 would not defeat the Taliban, the Chinese gradually started developing ties with the group and seeking a greater role in the peace negotiations that were to follow. In 2015, China hosted secret talks between representatives of the Taliban and the Afghan government in Urumqi. The next year, a Taliban delegation headed by Sher Mohammad Abbas Stanekzai (then the group’s representative in Qatar) visited Beijing and sought the support of the Chinese for their position in Afghan domestic politics. As Chinese efforts intensified, the next high-level meeting was held in June 2019, when the group’s deputy leader Abdul Ghani Baradar visited China to discuss issues related to the Afghan peace process and counter-terrorism. In seeking a deeper relationship with the Taliban, China has inherently relied on Pakistan and Pakistani supporters of the Taliban, such as the late Maulana Sami ul Haq, known as the “Father of the Taliban”. In September 2019, when talks between the US and the Taliban faltered, China invited Baradar again to participate in an intra-Afghan conference in Beijing. However, this conference never took place. Apart from these unilateral initiatives, China was also a part of several multilateral initiatives such as the Quadrilateral Coordination Group and the Heart of Asia-Istanbul process.

The heightened significance of the Afghan war in China’s foreign policy is reflected in the fact that for the very first time China assigned a country-specific special envoy– since the creation of the post, there have been four Special Envoys for Afghan Affairs with the present being Yue Xiaoyong whose appointment on 21st July, 2021 comes at an extremely vital time.

Chinese Development Ambitions in Afghanistan

The highly publicized meeting of Taliban leaders (including Mullah Baradar) with the Chinese Foreign Minister Wang Yi in late July led to several crucial promises being made and Baradar even invited China to “play a bigger role in future reconstruction and economic development” of the nation.


Source: Stratfor

The unique geographical location of Afghanistan – as an important crossroad into Central Asia, Middle East and South Asia – makes it a primal factor in the success of China’s Belt and Road Initiative (BRI). The importance of Afghanistan was noted by the former Chinese ambassador to Afghanistan Yao Jing who stated in 2016, “Without Afghan connectivity, there is no way to connect China with the rest of the world”. Up until the 16th century, Afghanistan played a pivotal role as a regional trade and transit hub sitting at the meeting point of ancient trade routes, known as the Silk Road. In 2011, a new initiative known as the New Silk Road was envisioned by the then Secretary of State Hillary Clinton. However, this was later replaced by China’s BRI because the American initiative lacked the “Pacific-to-Atlantic scope”.

Afghanistan formally joined the BRI in 2016. Several projects such as the Five Nations Railway, Sino-Afghan Special Railway Transportation Project, Corridor 3 of the Afghan National Railway Plan and the Digital Silk Road, specifically the fiber optic link with China through Afghanistan’s Wakhan corridor, have been undertaken by China and the Afghan government. Afghanistan also became a member of the Asian Investment and Infrastructure Bank (AIIB) in October 2017 in order to facilitate cooperation on infrastructure development under the BRI and Regional Economic Cooperation Conference on Afghanistan (RECCA). In September 2019, China, Afghanistan and Pakistan decided to officially extend the China Pakistan Economic Corridor (CPEC), China’s flagship project under the BRI, into Afghanistan. In China’s calculation, the planned extension of the$61 billion CPEC into Afghanistan could be an essential solution to create a stable and terrorist-free Afghanistan. However, until now Chinese investments in Afghanistan have remained significantly low if compared with other nations such as Pakistan.

Huge investments by China under the BRI in Pakistan and the Central Asian nations neighbouring Afghanistan will in time create a diplomatic pressure from all the stakeholders on the new Taliban government in Afghanistan to ensure the stability of the country and to not allow it to be a safe haven for terrorism.

Conclusion

The Chinese have three complementary national interests and concerns in Afghanistan- first, they cannot see the country turn into a safe haven for terrorism (particularly in the form of ETIM); second, Afghanistan is geostrategically located within the vortex of the BRI; and third, China would like to benefit from the rich mineral deposits in Afghanistan. Moreover since distance matters a great deal in trade and transit, China would be willing to invest in projects to make condensed access a reality, provided the Taliban can guarantee safety of Chinese personnel and assets.

It is vital to note that Afghanistan has required external assistance in meeting not only its developmental programmes but even its basic national budgetary funding requirements. As aid payments from the West have been severely curtailed, the Taliban is looking towards China. Recently, China has announced a $31 million aid package for Afghanistan, in what appears to be one of the first new foreign aid pledges for the Taliban-ruled country. However, as Afghanistan is on the cusp of a humanitarian catastrophe and will need billions in aid to avert the possibility of universal poverty, it will be interesting to see if China is willing to enmesh itself in the murky development aid politics of the country.

China has made two vital gains by recognizing the legitimacy of the Taliban: first, China can hold the Taliban accountable for any attack on its citizens or assets emanating from Afghanistan and since the Taliban will be dependent on Chinese investments to a considerable extent, they will have to mend their ways; and second, China’s BRI will inevitably profit from stability in Afghanistan. Thus, China has done a good job of walking the tightrope in Afghanistan. A lot now depends on the Taliban’s policies which will decide China’s future engagement in the war-torn nation. For the present, it would seem like the Chinese strategy of courting the Taliban is paying off; but, whether it actually does, only the future will tell.

The author is thankful to her mentor, Ambassador Vijay K. Nambiar, former Ambassador of India to China and UN Secretary General’s Special Advisor on Myanmar, for his invaluable guidance and support in writing this article. The views expressed here are those of the author(s), and not necessarily of the mentor or the Institute of Chinese Studies.

Chinese Mining in the DRC: From Sicomines to Global Cobalt Monopoly

Halim Nazar, Research Intern, ICS

Image: The Tenke-Fungurume Mine in the DRC
Source: Reuters

The Democratic Republic of Congo (DRC) embodies the paradox of plenty. Despite having an untapped resource wealth worth an estimated $24 trillion, the country remains one of the poorest in the region and needs urgent reform. Sino-Congolese relations can be traced back to the mid-1960s when the Chinese Communist Party (CCP) supported the Congolese struggle against “American imperialism” and capitalism, but it was only after 2008 infrastructure-for-minerals deal that Chinese influence became more perceptible in the DRC. Chinese mining companies have been focusing on the DRC not only because it has high-grade mineral deposits but also because competition from other transnational companies is minimal as they are wary about operating in the DRC given its tinted track record, especially when it comes to the protection of human and labour rights, and its frequent episodes of social unrest.

Almost 70 percent of the Congolese mining portfolio is under Chinese control, and so the industry is affected whenever China is affected. Chinese investors like Minerals and Metals Group (MMG) and China Molybdenum’s Tenke Fugurume are prominent in the cobalt and copper-rich Lualaba and Haut Katanga areas along with global traders like Trafigura and Glencore, and Canada’s Ivanhoe Mines and Barrick Gold Corporation, but artisanal mining still accounts for 20%-40% of the cobalt production. Nevertheless, the success of their recent forays, as well as the predicted increase in demand for precious metals, particularly cobalt, have motivated Chinese companies to bolster mining operations and increase investments and lobby their government to renew negotiations for greater mining rights.

China strengthened its presence in the DRC with the infrastructure-for-minerals deal that provided substantial mining rights in exchange for developing the DRC’s war-torn infrastructure. In late 2007, China announced a $5 billion loan to the DRC for infrastructure development with substantial investments to follow and a joint venture was set up to execute the terms of the agreement. The joint venture was named Sino Congolaise des Mines (Sicomines) and was established with a Chinese majority shareholding of 68%. The initial Chinese investments were to be evenly divided between mining projects and the development of roads, railways, schools, hospitals and dams. China has described the deal as a mutually beneficial relationship, which is absent of any political conditionality wherein China would gain access to critical minerals essential for its energy products, and the DRC would gain from the development of its shattered infrastructure and the growth of its productive capacity. Over 10 years since its inception, the so-called “deal of the century” has improved the DRC’s macroeconomic performance while also bolstering infrastructure developments. Yet, the deal still has a lot to live up to and will depend on the DRC’s ability to consolidate the benefits and ensuring that promises are kept. Moreover, since the Sicomines deal are exempt from taxes until infrastructure and mining loans are fully repaid, the DRC won’t receive any substantial income from the agreement for the foreseeable future.

Despite a rocky start and reduction in scale after two sets of renegotiations as funding from China Eximbank became uncertain, mining operations finally began in 2014. Under the agreement, China would receive 10 million mt of copper and 600,000 mt of cobalt worth approximately $50 billion over 25 years. In 2016, Congolese sources estimated that $1.2 billion had been spent on infrastructure and mining credits combined. Mining activities smoothly progressed, and Congolese cobalt production crossed 100,000 mt/year in 2018 and copper production went above a million mt/year until the global COVID pandemic when cobalt mining rates slightly went below 100,000 mt/year in 2020. Resource-for-Infrastructure (RFI) deals like this all over Africa have helped China foster strong relations with several countries and consolidate its position as a great power. China draws support and exerts its influence on these nations in matters of dire importance at the UN and while staking the claim of “One China”, which is the People’s Republic of China (PRC) and calls for the isolation of Taiwan (Republic of China). The Sicomines agreement has been widely criticized as it is perceived to unfairly benefit the Chinese. The IMF publicly criticized the DRC for taking on too much debt.

Cobalt has become an intensively sought-after mineral as the blue element is crucial for lithium-ion batteries. Given the surge in demand for electric vehicles, Cobalt demand is predicted to grow fourfold by 2030. With reserves in the ballpark of 3.5 million mt, the DRC hosts over 51% of the global cobalt reserves, and it is estimated that in 2020, the DRC produced about 90,000-95,000 mt of cobalt representing nearly 70 percent of the total cobalt feedstock production globally. Several Chinese companies like Chengtun Mining, Wanbao and CNMC have bolstered their mining operations and have expressed their desire to acquire more cobalt mines. But the new Congolese president Felix Tshisekedi has been a vocal critic of the current deal and has called for renegotiations in the spirit of drafting win-win agreements. The Sicomines deal has been mired with secrecy and controversy from the very beginning, with even the Congolese Mines Minister being denied crucial information regarding the agreement. Corruption runs rampant in the DRC as a fifth of the country’s mining revenues – $750 million – was lost to corruption between 2013 and 2015, according to The Global Witness.

China has shown signs that it is ready to strengthen this strategic partnership and recently cancelled the DRC’s interest-free loans worth an estimated $28 million and promised to fund infrastructure projects and also give $17 million in other financial support as the Central African nation joined the Belt and Road Initiative (BRI) and to also help the country overcome the impact of Covid-19. China’s decision to write off debts and welcome the country as a new partner for the BRI would further drive cooperation between the two countries and incentivize more Chinese miners to invest further into the Congolese copper and cobalt industry, increasing their stake in local mines. Essentially improving access to proven cobalt and copper reserves worth billions by waiving off a paltry $28 million loan.

Cobalt is crucial for battery technologies and to facilitate the global transition to a fossil-free future. In the current global scramble to secure forward supplies and escape the eccentricities of the spot market, China holds all the cards. Control over crucial raw materials like cobalt, along with state-of-the-art processing and manufacturing capacity, will determine the balance of industrial power, particularly in automotive and energy storage. Presently, China is the frontrunner, and it seems likely to retain this control for at least the medium-term.

Zapad/Interaction-2021: A New Milestone in China-Russia Joint Military Exercises

R. M. V Pavan Raghavendra, Research Intern, ICS

Source: Ministry of National Defence of the People’s Republic of China

The People’s Republic of China (PRC) and the Russian Federation recently conducted the ‘West/Interaction-2021’ joint military Exercise (hereinafter called Exercise) from 9 to 13 August 2021.

Titled 西部·联合-2021 (xibu/lianhe-2021) in Chinese, and “Запад/Взаимодействие-2021” (Zapad/Vzaimodeystviye-2021) in Russian, the Exercise was unprecedented in terms of scope, level of participation by both sides and its conduct.

The theme of the Exercise was ‘safeguarding regional security and stability’ and it intended to ‘verify and improve joint reconnaissance, early warning, and electronic information attack and joint attack and elimination’. While Chinese media claimed that more than 10,000 troops from the PLA’s Western Theatre Command (WTC) and Russia’s Eastern Military District (EMD) participated in the Exercise, Janes Defence News reported 13,000 troops.

Russian troops operated PLA weapons and equipment during the Exercise, of which more than 80 per cent were modern, including a newly unveiled Type 95 ‘4-25’ integrated gun-missile air-defence system. The PLA’s J-20 fighters and Y-20 transport aircraft, and Russian Su-30 also participated in the Exercise.

It is interesting to consider the selection of troops participating in the Exercise from both sides and the location before looking at the conduct.

The WTC comprises 76 and 77 Group Armies and is responsible for China’s borders with India, South and Central Asia, and ‘counterterrorism’ in Xinjiang and Tibet. Tibet and Xinjiang Military districts (MD) located within WTC have sizeable troops and are directly under the CMC/PLA Ground Forces HQ.

As observed from CCTV 7 coverage, PLA troops* participating in the Exercise were drawn from the 181 Combined Arms Brigade, Artillery Brigade, and Special Operations Brigade of the WTC’s 77 Group Army (GA), 84 Army Aviation Brigade of Xinjiang MD, and the Airborne Corps. The choice of 77 GA over 76 GA is curious as it is based in Sichuan and is oriented to South West along the India-China Line of Actual Control (LAC) in Tibet. The 76 GA is based in Qinghai, Ningxia and Gansu, and is oriented towards the North West, i.e., the Western sector of the LAC in Xinjiang and South and Central Asia.

EMD‘s Area of Responsibility covers Eastern Siberia up to the Pacific Ocean and includes Russia’s land borders with China and Mongolia. Russian troops participating included a motorised rifle unit located in the Trans-Baikal region, operational-tactical aviation units, and a combined army aviation detachment.

One of the two main Combined Arms Tactical Training Bases (CATTBs) in WTC, the Qingtongxia (青铜峡) CATTB, is located at the base of Helan mountain ranges at an altitude of 2000m. The terrain is semi-desert with an arid climate. The base contains an urban warfare training village, electromagnetic environment simulation, monitoring and control systems, and a 1:500 scale model of the Aksai Chin.

Conduct

Before the actual Exercise, both sides conducted extensive preparations, which included familiarisation and handling of PLA weapons and equipment followed by live firing. The joint tactical training which followed included long-range precision fire by artillery and airdropping of troops and Infantry Combat Vehicles (ICV).

The PLA established a three-tiered joint bilingual (Russian-Chinese) joint command centre to ensure smooth coordination between PLA personnel and their Russian counterparts at all levels. China’s Central Military Commission (CMC) set up a directing department under General Li Zuocheng, member of the CMC and Chief of the Joint Staff Department, while Lieutenant Generals Liu Xiaowu and Mikhail Nosulev, Deputy Theatre Commanders of WTC and EMD respectively, headed the Joint Command and were involved in joint planning.

An extensive communication network involving ten communication methods and multiple networking modes with information terminals was established to ensure real-time information sharing and passing of instructions between the Joint Command and troops.

The main Exercise was conducted in four stages involving joint confrontation, destruction of enemy defences, three-dimensional attack and pursuit and annihilation, involving extensive ground-air coordination.

Under cover of the J-20 and other fighter aircraft, H-6 bombers and JH-7As fighter bombers carried out the destruction of enemy defences in depth while artillery systems including multiple rocket systems and 155mm gun howitzers engaged enemy targets firing hundreds of tons of ammunition within forty minutes.

Y-20 and Y-9 aircraft were used to paradrop Airborne troops along with ZBL-03 to carry out long-range deep assaults to seize enemy defences and gaining battlefield initiative, while special forces along with Lynx were inserted using Mi-17 helicopters and escorted by Z-20 Attack Helicopters. The extensive use of drones for reconnaissance and surveillance, swarm attacks on ‘enemy’ positions, sniping of enemy targets and post-strike damage assessment was another unique feature of the exercise, while ground-based multi-layered air defences intercepted and destroyed enemy drones.

The Exercise’s Closing Ceremony was attended by the Defence Ministers of both countries who agreed to ‘enhance strategic communication, deepening cooperation in areas such as counterterrorism and working together to safeguard regional stability’.

The China-Russia Military Partnership: The Past and the Future

The PRC and erstwhile-USSR had a history of military cooperation from the pre-Liberation era till the deterioration of Sino-Soviet relations in the late-1950s. During the PRC’s initial years, much of PLA doctrine, organisation and equipment were borrowed from the Soviet model.

The current round of military cooperation commenced after the Sino-Russian boundary dispute was settled in 2005. Since then, the exercises have varied in scale and level of participation. These include the Peace Mission 2005 exercise and the Vostok-2018, Tsentr-2019, and Kavkaz-2020 drills.

At the military level, the Exercise is unprecedented in four aspects; first, is the level of jointness exhibited by the PLA in combining airborne and heliborne operations with ground operations in what the PLA claimed as a ‘three-dimensional’ operation. PLA sources also claimed that the vertical separation between lowest flying aircraft and the vertex of artillery shell was less than 200 metres, reflecting a high degree of coordination between the air and ground elements; second, there was near equal participation by both sides; third, unlike in the past, where both sides operated as distinct entities under an overall command, Russian troops were integrated into mixed formations; and lastly, PLA participated with its latest equipment including J-20 fighters and Electronic Warfare equipment.

The deployment of J-20 fighters, H-6K bombers, airborne and heliborne exercises and the level of degradation sought to be achieved also suggest that the Exercise was aimed at ‘regional stability’ rather than ‘counterterrorism’. The heightened interoperability between Russian armed forces and the PLA will definitely boost their capability to respond to regional threats.

The Exercise thus provides valuable experience to both sides and a foundational tool to institutionalise the bilateral defence relationship without formally entering into a military alliance.

On the diplomatic level, both Beijing and Moscow have claimed that the joint exercises are not targeted against third parties. The geopolitical signalling and intent behind the joint exercises, however, seems to involve multiple dimensions.

Firstly, the drills are being conducted in the context of increasing Western presence in China’s neighbourhood with the Quad deepening cooperation in the Indo-Pacific and Freedom of Navigation Operations in the South China Sea. Relations between Russia and the West have also sunk to a new low after the former’s annexation of Crimea. The deepening of China-Russia military ties indicates a strategic posturing on the part of both sides to contest the West.

Second, the withdrawal of US troops from Afghanistan has resulted in the Taliban taking control over the country, which threatens regional and domestic stability in neighbouring countries. Thus ‘counterterrorism’ is amongst the main agendas of the Exercise. Russia has decided to provide weapons, equipment, and training to Tajikistan’s armed forces.

Finally, the drills serve to signal India about the level of PLA’s operational preparedness as it comes against the backdrop of the ongoing crisis in Eastern Ladakh. On the Russian side, the Exercise signals Russia’s concern about India’s relations with the US despite India’s reassurance that its relations with the US were not at the expense of its relations with Russia. An interesting aspect was that the Joint India-Russia Exercise INDRA-2021, aimed at planning and conducting counterterrorism drills under UN mandate, was held at Volgograd around the same time. The deepening of the military partnership between Russia and China is thus of concern to India. * Special thanks to KK Venkatraman, Research Fellow at Institute of Chinese Studies, Delhi, for drawing attention to this.