IN FOCUS
By Keerthana Nambiar

Escalating tensions in US-China trade relations

On 7 February, the US government announced that 33 Chinese organizations will be facing new restrictions on transactions stating their inability to prove legitimacy. The Commerce Department’s Bureau of Industry and Security announced that they will be adding companies to the “Unverified List” and will be subjected to stricter export control. Matthew Axelford, the department’s assistant secretary for export enforcement said: “The ability to verify the legitimacy and reliability of foreign parties receiving US exports through the timely completion of end-use checks is a core principle of our export control system.”

The department also said that the addition of 33 organizations from China to the Unverified List “will assist US exporters in conducting due diligence and assessing transaction risk, and signal to the PRC government the importance of their cooperation in scheduling end-use checks.”

On 8 February, China’s commerce ministry made a statement saying that Washington must correct its “wrongdoings” and should return to cooperation and contribute to the global economic recovery. The list contains 175 entities, including from Russia and the UAE. 

The new technology restrictions imposed on China by the US represents the escalation of the decoupling policy of the Biden administration. The initial crackdown on Chinese tech companies began under the Trump administration in line with the US Congress passing the America Competes Act of 2022. In 2019, the initial tone of the trade conflict between Washington and Beijing was based on export controls and increased tariffs on Information and Communication Technology products. By 2020, the US imposed full restrictions on tech companies like Huawei and Tencent Holdings, and other larger Chinese tech companies. 

The concerns raised by the US in the technological sphere about China were threats posed to US security. Since the escalation of political and economic conflict between the US and China, Washington fears the Chinese government aid to the tech companies and the possible disclosure of sensitive information through computer networks. China believes that the true drive behind US imposing restrictions is based on a power struggle. China’s technological rise poses a threat to US dominance. 

The US-China tech war is slowly disrupting the highly-integrated global market system. China sees the negative trade imbalance between Washington and Beijing as alarming. The extent of dependency between China and the US is complex and intertwined with each other.. As far as China is concerned, the US initiated the trade war, and China has not retaliated or employed any measures to disrupt trade and supply chains.

References
“US adds 33 Chinese companies to red flag list, unseals Hytera indictment,” South China Morning Post, 8 February 2022
“China urges US to correct mistake in targeting 33 Chinese firms,” Global Times, 8 February 2022
“US-China tech war: Washington’s latest unverified list hits at the most vulnerable parts of China’s technology supply chain,” South China Morning Post, 13 February 2022
“GT Voice: US’ reported trade moves against China don’t bode well for anyone,” Global Times, 15 February 2022 

IN BRIEF
By Dincy Adlakha and Avishka Ashok

INTERNAL
Beijing Organizing Committee for the Olympic Games spokesperson gives strong political statements on Xinjiang and Taiwan
On 17 February, Yan Jiarong, spokesperson for the Beijing Organizing Committee for the Olympic Games (BOCOG) released strong political statements in a first. The spokesperson said that the claims of forced labour in Xinjiang are a lie and that Taiwan is an inseparable part of China. Previously, any such political statement has been avoided by the Committee. The spokesperson said that China has a “very solemn position” on the matters. She had answered a question pertaining the reports of Taiwanese delegates boycotting the closing ceremony of the games. (Liu Zhen, “Beijing Olympics official decries reports of Xinjiang forced labour, calling them a ‘lie’,” South China Morning Post, 18 February 2022)

Zhejiang province pledges to expand middle-income group for common prosperity
On 17 February, the Chejiang province of China vowed to implement measures aiming at expansion of middle-income group to support the common prosperity pursuit. The Deputy Chief of the province Xie Xiaobo said: “The goal is to form an olive-shaped social structure with the middle-income group as the mainstay.” He promised that 80 per cent of the household from Zhejiang will earn between 100,000 yuan to 500,000 yuan per year. He also promised to provide special support to college graduates and introduce measures to promote Chinese-style modernization. (“China's Zhejiang vows to expand middle-income group,” People’s Daily, 18 February 2022)

ECONOMY
Declining food prices control Chinese inflation
On 17 February, People’s Daily reported that China’s inflation further controlled in January 2022 as the food prices declines. The prices of coal and steel sectors also retreated moderated the inflation. The Consumer Price Index which is an indication of average expenditure of an average household reduced from 1.5 to 0.9 in January. The CPI is the biggest indicator of inflation. The food prices that saw a 3.8 per cent decline at year-on-year basis was majorly pushed by decline in the price of pork, a staple food in China. (“China's inflation moderates in January, tempered by food prices,” People’s Daily, 17 February 2022)

China set to increase gas and diesel prices
On 17 February, the National Development and Reform Commission of China announced that authorities will increase the prices of gasoline and diesel with effect from 18 February. The price of gasoline will increase by 210 yuan and that of diesel by 200 yuan. The top economic planner of China attributed the reason for the price increase to international crude oil price change. The three biggest suppliers of oil in China including China National Petroleum Corporation, China Petroleum & Chemical Corporation, and China National Offshore Oil Corporation have been asked to maintain production, transportation and stable supply of the fuels. (“China to raise prices of gasoline, diesel,” People’s Daily, 18 February 2022)

INTERNATIONAL
US trade report accuses China for not liberating markets
On 17 February, the Office of the US Trade Representative released its annual report that pointed China is falling back on its commitments of liberating the markets. The report says that Chinese trade practices are in contradiction to the WTO rules as they have not been opened for foreign competition. While speaking on the matter, the US Trade Representative Katherine Tai said: “China has instead retained and expanded its state-led, non-market approach to the economy and trade.” The report found Chinese leadership not dedicated to the cause and mentioned: “China’s leadership appears confident in its state-led, non-market approach to the economy and trade and feels no need to conform to global norms.” (“U.S. accuses China of backing away from free-trade commitments,” The Asahi Shimbun, 17 February 2022)

President Xi conveys celebratory message to Sri Lanka on 65th anniversary of diplomatic relations
On 17 February, President Xi Jinping sent a congratulatory letter to China-Sri Lanka political parties conference to mark the 65th anniversary of diplomatic ties between the two countries. He also commemorated the 70th anniversary of the Rubber-Rice pact in the letter. He appreciated the collaborative fight against COVID-19 by China and Sri Lanka. He also said: “China-Sri Lanka relations are a good example of friendly coexistence and mutually beneficial cooperation between countries different in size.” His letter generated hope of continued friendship and traditional bilateral relations between China-Sri Lanka. (“Xi sends congratulatory letter on 65th anniversary of China-Sri Lanka diplomatic relations,” Xinhua Net, 17 February 2022)

China displays military aircrafts and fighter jets at Singapore air show
On 17 February, a wide range of military aircrafts and fighter, trainer jets participated in the ongoing airshow in Singapore. The jets presented during the event were recently procured by the Aviation Industry Corporation of China (AVIC). The Singapore airshow was the first international exhibition that AVIC participated in this year. Through the air show, China displayed multiple-featured aviation designs to prospective buyers from the region. South East Asia does not have many advanced military planes and China offered the same at the airshow. (Liu Xuanzun, “China offers fighters, training aircrafts, choppers and drones at the Singapore Airshow,” Global Times, 17 February 2022)