May 19, 2023
Russia & Europe
After becoming the first G7 country to join China’s Belt and Road Initiative (BRI) in 2019, Italy is reportedly considering ways to exit from Beijing’s global infrastructure project. Prime Minister Giorgia Meloni is expected to signal Rome’s plans during the upcoming G7 meeting in Japan.
The move could impact Italian exporters who had hoped that eased access to China would prove lucrative. China’s exports to Italy grew by 51 percent from 2019 to 2022, while its imports from Italy rose by only 26 percent during that time, according to Italy’s Trade Agency.
Rome has in recent years deepened ties with Taiwan and fostered defense cooperation with Japan and India, appearing to support U.S.-led efforts to contain coercive trade and diplomatic moves by Beijing.
Technology / Cyber
Prime Minister Rishi Sunak is reportedly preparing to unveil the UK’s long-awaited semiconductor strategy at the G7 Summit in Japan. The plan will dedicate $1.24 billion in investments toward domestic chip production capacity. The amount is far less than the newly formed Department for Science, Innovation and Technology (DSIT) has lobbied for, as the US, EU, and Japan have all dedicated more substantial sums.
Britain’s strategy is likely to emphasize scaling existing design and manufacturing companies, securing supply chains, and building critical skills. Leaders from several tech startups, including Pragmatic Semiconductor, IQE, and Paragraf have previously expressed frustration with the level of government subsidies.
A new bilateral pact with Japan signed this week, dubbed the "Hiroshima Accord" by Downing Street, will launch a new "semiconductors partnership" between the two nations to protect chip supply chains.
The 11th round of European Union sanctions against Russia will focus on countering circumvention of extant trade sanctions, rather than rolling out new bans on specific Russian products and sectors. The new package proposes three measures to close loopholes for the re-export of dual-use goods, advanced technologies, and critical components. The primary affected regions and countries are likely to be Central Asia, the Caucasus, China, Turkey, and the United Arab Emirates – all of which have seen a surge in imports from the EU and exports to Russia in the past year.
The package is unlikely to please Kyiv, as it will not include bans on imports of Russian diamonds, gas, alloys, and nuclear energy cooperation, as member states have struggled to reach consensus on these areas.
Sweden aims to finalize its year-long accession to NATO at the alliance’s summit in Lithuania this July, following its neighbor Finland’s membership was secured last April. After decades of cuts, the Swedish armed forces aim to ramp up recruiting, expanding bases, and procuring advanced weapons.
However, Stockholm’s military spending still falls well short of NATO’s benchmark of 2 percent of GDP. The country in 2022 budgeted 1.3 percent to defense – the lowest of any of the Baltic Sea littoral states. Authorities do not expect to reach the 2 percent until 2026.
Western and Russian strategists have long assessed that control of the Swedish coastline and of its Baltic island of Gotland would be decisive in any conflict in northeastern Europe.
Global oil demand reached record highs in March, driven by post-pandemic economic growth in the United States and China. Meanwhile, global inventories dropped the same month, signaling potential tightening in the months ahead. Significant production outages in Iraq, Nigeria and Brazil were only partly offset by increases elsewhere, while Canadian wildfires also threatened to crimp supplies through May.
The benchmark comes the same year that some analysts expect a turning-point in CO2 emissions from electricity generation to plateau—or begin falling—due to the expansion in renewables such as solar and wind. “2023 is the year when the power sector emissions start going down instead of up – and everybody will see that's not a fluke. It's very foreseeable. It's obvious that at some point the growth of the renewables overtakes the growth of our system as a whole, and emissions start coming down,” analysts told the BBC last month.
The International Energy Agency last month similarly estimated that 2023 would be a record-breaking year for demand in electric vehicles, with demand up a likely 35% over 2022—offsetting roughly 5 million barrels of oil per day by 2030.
The new trajectory of the CCP’s relationship with foreign firms may be clear to almost everyone except companies most invested in not seeing things as they are.
Recent laws—Data Security Law, Cybersecurity Law, National Security Law, People’s Information Protectional Law, and the Counter-Espionage Law—all passed or update since 2017 have laid the groundwork for expanding scope of state control over “sensitive” information. Companies have been coerced to facilitate repression of diaspora communities overseas or provide access to data otherwise kept private.
The CCP’s politics have increasingly centered around Xi’s political faction, who has elevated the security services to the Party’s highest body. Xi sees private business as a political power base for his opponents and he is enabling greater surveillance and interference in their activities.
Party cells, once wished by firms to be benign are starting to increase in number. Although mandated by law in any company with more than 3 party members since the early 1990s, the rule is now being enforced in the Xi era. First targeting the finance sector last year, more firms may allow the establishment of Party cells (or Party Committees).
The Party has also recently taken steps to blind foreign researchers to China’s inner workings, taking down valuable databases in the process.
Businesses must be reviewing what data is kept, where it is kept, and who has access—along with questions about the political sustainability of certain lines of business.
Technology / Cyber
Montana signed into law a ban against new downloads of the TikTok app to users in Montana, setting up a legal case over the first amendment.
First amendment groups—like the American Civil Liberties Union—and ByteDance (TikTok’s parent company) criticized the law, claiming it infringed on Montanan’s ability to express themselves online. The law will go into effect next January but will likely be challenged in court and put on stay before then.
The US Department of Justice charged a U.S. citizen for working on behalf of China’s United Front Work Department to surveil people in the U.S. critical of the PRC.
The charges follow years worth of investigations and work by the DOJ to fight the PRC’s repression of CCP-critics in the U.S. The charges against a U.S. citizen are rare, as many charged have been PRC citizens residing in the U.S.
Election activities in Canada show the power and reach of the United Front Work Department, however.
The UFWD, a branch of the CCP dedicated to political activism and propaganda activities in foreign countries and their diaspora communities, has done a good job organizing itself abroad.
As a result of their organization and ability to concentrate diaspora communities around shared holiday activities or cultural events, they are able to keep tabs on overseas Chinese (a political concern for the CCP). Incidentally, they are also the best political organizing block for politicians seeking to court
”ethnically Chinese” voters.
That’s how Toronto mayoral candidate Olivia Chow—a vocal supporter of Hong Kong pro-democracy activists—ended up meeting with an organization supported by the UFWD in Canada.
The same organization that led to the U.S. citizen’s indictment also organizes critical access to diaspora communities in Canada—such is the painful duality of the control that UFWD exercises.
The US and Taiwan announced a “trade deal” that didn’t address tariffs, but will streamline customs and improve efficiencies at ports.
The deal’s most significant value may be symbolic, coming a week before PRC and US commerce secretaries are set to meet. It’s unclear how upset the PRC will be over the deal. China sees continued formalization of the US-Taiwan relationship as “altering the status quos.”
A Chinese national is suspected of dozens of bomb threats against tourism destinations in Taiwan, which have disrupted the regular flow and operations of many of the country’s cash-cows.
PRC activists began using bomb threats at the travel destinations and hotels of China’s critics in the US and EU last year. This string of threats may be linked to those activities, but now concentrated on Taiwan.
Taiwan’s parliament questioned the Ministry of Justice on the matter and has reached out to the PRC through its Mainland Affairs Office, seeking support into the investigation.
Local officials across China have started to intervene in “bridal markets” to quash the practice of dowries, something the government argues slows matchmaking and birth rates.
As much as officials might try, bride prices are not the reason for low birth rates or slow matchmaking among China’s youth.
The ever increasing cost of living combined with the current 20% youth unemployment rates means young Chinese are more pessimistic about their economic future than any point in the last 40 years.
Leaked police data last summer was used by demographers to determine that China’s population had already peaked in 2018 and had begun to decline. Without political space to welcome immigrants into Chinese culture, pressure to move up the value chain in global trade will be immense.
Without better, higher paying jobs as a result of improving goods offered on the global market, China risks being caught in the middle income trap.