Taiwan’s election heats up; as do Beijing’s warnings

Decoding transatlantic relations with Beijing.

By STUART LAU

with PHELIM KINE

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GOOD TUESDAY MORNING. This is Stuart Lau in Brussels. We’ll have a full debrief for you on the latest developments in the build-up to the Taiwanese presidential election on January 13. As for Beijing, President Xi Jinping followed up his meeting with U.S. counterpart Joe Biden with a call with French leader Emmanuel Macron on Monday. Keep reading to see what he pledged Paris. Phelim Kine will be with you from DC on Thursday.

TAIWAN ELECTION

TSAI‘S AMBO IN DC JOINS RACE AS RUNNING MATE: Taiwan’s Ambassador to Washington Bi-khim Hsiao, a close confidante to outgoing President Tsai Ing-wen, became the vice-presidential candidate for Lai Ching-te, the frontrunner in the upcoming poll, Lai’s Democratic Progressive Party announced on Monday. Beijing is fuming at the ticket — especially as the chaotic pro-China camp in Taiwan remains split.

Who is she? Hsiao, known officially as the Taipei economic and cultural representative, is a heavyweight in the DPP, the party Beijing often blames for secessionist tendencies. Before her posting, the Japanese-born half-American was a lawmaker for eight years. Lai praised Hsiao as “a warrior for democracy and one of Taiwan’s most influential ambassadors,” in a post on the X social media platform. (Your handy China Watcher cheat sheet on Hsiao’s political creds is right here.)

Beijing’s reaction: Like Lai, Hsiao is similarly targeted by Beijing, which has twice sanctioned her for what it calls her independence agenda. Last week, when Taiwanese media previewed Hsiao’s announcement, China’s Taiwan Affairs Office lashed out at the Lai-Hsiao ticket’s “independence double act,” warning Taiwanese people to be “very clear” about the “situation in the Taiwan Strait” should the pair get elected. Taiwan’s diplomatic outpost in Washington didn’t respond to a request for comment.

PRO-CHINA CAMP DISARRAY: Despite Beijing’s threats, Lai appears to be on a glide path to victory in election, after his two main opposition rival candidates failed to reach agreement on a potentially formidable joint electoral ticket.

Xi’s grounds for use of force: According to a senior U.S. official, speaking after Biden’s meeting with the Chinese leader last week, Xi “underscored that this [Taiwan] was the biggest, most potentially dangerous issue in U.S.-China relations, laid out clearly that, you know, their preference was for peaceful reunification but then moved immediately to conditions that the potential use of force could be utilized.” After Biden reiterated the U.S. position on peace and stability, “President Xi responded: look, peace is … all well and good but at some point we need to move towards resolution more generally,” according to the official quoted by Reuters.

TRADE AND TECH

TIPPING POINT FOR EUROPE WITH AN AGGRESSIVE CHINA: The EU “stands at a crucial juncture” where its future depends on its ability to harness disruptive technologies ahead of Beijing, according to new report co-prepared by former French ambassador to China, Russia and the U.K. Sylvie Bermann and Elvire Fabry, senior research fellow at the Jacques Delors Institute.

In an exclusive preview by China Watcher, the report draws up a multitude of scenarios — some gloomier than others. In the event of Beijing’s war against Taiwan, for instance, “this leads to semiconductor supply shocks and significant inflation in all sectors of the Western economy,” it says, adding: “There is not just a technological plateau but a sudden decline in growth, with major disruptions in global value chains and the need for rapid reconfiguration.” 

China’s dire economy is bad news for EU biz: According to the report, the worsening Chinese economy is now adding uncertainty to European businesses’ own future. “EU companies will benefit less from China both in terms of exports but also in terms of their profits from their foreign direct investment,” according to Alicia García  Herrero, a senior fellow at the Bruegel think-tank. “Against such a backdrop, one should expect China to become increasingly interested in European technology as the U.S. steps up its containment. The EU should pay more attention to such tech transfers.”

EU’s right to self-defense: Bermann, the ex-ambassador, highlighted the need for the EU to carry out de-risking — for real. “China’s stranglehold on the production of certain strategic goods and technologies puts Europe at risk of economic arm-twisting, where China could either restrict access to these goods or command an exorbitant price tag,” she wrote, with Fabry. “Europe’s de-risking strategy should include making China aware of the potential economic downsides of its push for self-sufficiency, including greater isolation and a slowdown in technological innovation.” 

You can read the full report here.

VON DER LEYEN DOUBLES DOWN ON EVs: European Commission President Ursula von der Leyen last week doubled down on the need for the EU to investigate Beijing’s state subsidies into the electric vehicle industry, less than a month before she jetted off to Beijing for the EU-China Summit and meeting with Xi.

Don’t take us for granted:“Europe is open to competition, but it is not open to a race to the bottom,” von der Leyen said, at times banging her fist on the small podium at a conference in Berlin. “We will go to China in good faith. We will never shy away in raising our concerns.” The event was jointly organized by the European Council on Foreign Relations and MERICS, a Berlin-based think tank sanctioned by Beijing.

“There is a clear overcapacity in China, and this overcapacity will be exported for sure, especially if overcapacity is driven by direct and indirect subsidies,” she said. “This will worsen as China’s economy slows down — and as its domestic demand does not pick up. This in the very end affects and distorts our market.” Here’s Stuart’s report from Berlin.

EU, UK PLAY A BIG ROLE IN CHINESE AI: Many European-Chinese AI research creations have military or surveillance applications, with functions ranging from target tracking, cybersecurity to biometric recognition, according to a new report by MERICS. “European researchers should consider the prospective partners, the specific research, and its potential end-uses,” it says.

Faster than the network by which you read China Watcher: China has started to roll out what it calls the world’s most advanced internet network, operating several times faster than current networks. CNN has more.

XI-MACRON

FOCUS ON CONFLICTS: The French president talked to his Chinese counterpart on Monday, as Beijing convened a meeting with a few foreign ministers from Arab and Islamic countries. Macron “presented the efforts being made to free the hostages held by Hamas” and agreed with Xi “on the importance of avoiding any escalation at regional level.”

Closer to Paris: On Ukraine, Macron “encouraged the Chinese authorities to maintain a dialogue with Kyiv” and expressed concerns on Pyongyang’s military ties with Moscow.

BIZ TALK: Xi said China is “glad to see the entry of an increasing number of French products into the Chinese market” and “welcomes more investment of French enterprises in China,” state media Xinhua reported. It added that Xi also asked Macron to ensure a “fair and non-discriminatory business environment” for Chinese companies in France.

MACRON CLINCHES DEAL WITH XI: The French president is eager to sign China up for a key initiative, co-run by France and Morocco, on climate-friendly buildings. According to Macron’s office, Xi is on the verge of doing that before the COP28 talks in Dubai late-November — though the Chinese readout of the phone call on Monday hasn’t mentioned it.

Parisian persuasion… Xi “announced China’s participation in the ‘Buildings Breakthrough’ initiative, which sets a target of zero emissions in the building sector by 2030, and reaffirmed China’s commitment to no longer financing coal-fired power plants abroad, while gradually reducing the use of this fossil fuel at home,” Macron’s office said in a statement.

… and would you care to join Macron’s 4P? “The French president reiterated France’s readiness to contribute to China’s energy transition, and encouraged President Xi to join the Paris Pact for People and Planet (4P),” the Elysée said.

… and fancy a dinner at Versailles? An Élysée official also confirmed that France is working toward a visit by Xi to Paris next year, Clea Caulcutt writes in to report. The official wouldn’t go into further details — but next year will be the 60th anniversary of Franco-Chinese diplomatic relations, while Paris will also be hosting the Summer Olympics.

And talking of climate cooperation…

TRANSLATING WASHINGTON

U.S., CHINA COP CLIMATE COOPERATION CLIFFHANGER: The good news is that Washington and Beijing are talking to each other again and restarting some of their technical cooperation on climate issues, after a yearlong freeze. That may still not be enough to get nearly 200 nations to commit to far greater climate action at the United Nations COP climate talks that begin Nov. 30 in Dubai. 

The two superpowers’ latest détente creates the right “mood music” for the summit, said Alden Meyer, a senior associate at climate think tank E3G. “But it still is not saying that the world’s two largest economies and two largest emitters are fully committed to the scale and pace of reductions that are needed.” POLITICO’S Zack Colman and E&E News’ Sara Schonhardt have the full story here. 

STATE OKAYS MISSILE SALE TO JAPAN: The State Department has approved the sale of up to 400 Tomahawk missiles to Japan as part of Tokyo’s efforts to counter China’s increasingly aggressive military posture in the Indo-Pacific. The missiles “will improve Japan’s capability to meet current and future threats,” the Pentagon’s Defense Security Cooperation Agency said in a statement on Friday.

Beijing sees a threat: The missile sale will “exacerbate the momentum of an arms race, affect peace and stability in the region, seriously disrupt global strategic balance and stability and undermine the international order,” Chinese Foreign Ministry spokesperson Mao Ning said on Monday. 

XI’S HARD BARGAIN ON COUNTERNARCOTICS: President Biden’s agreement with Xi on counternarcotics cooperation aimed to address China’s role in America’s opioid overdose epidemic didn’t come cheap. Biden sealed the deal by dropping sanctions on a Chinese police facility that the Commerce Department had decreed was “complicit in human rights violations” against Uyghurs and other Muslim minority groups, POLITICO’s Carmen Paun reported on Friday. Beijing had long described those sanctions as an obstacle to such cooperation.  “It’s isn’t a quid pro quo, it’s capitulation…[Biden] gave in on a major designation with no conditionality,” said Craig Singleton, senior China fellow at the Foundation for Defense of Democracies.

The Commerce Department called the trade-off a public health measure, without commenting on whether it had cleared the institute of complicity in rights abuses. “It became clear that the inclusion of IFS on the Commerce Entity List inhibited the counternarcotics action necessary” to save American lives from synthetic opioid overdoses, said a senior Commerce Department official granted anonymity because they weren’t authorized to speak on the record. The White House didn’t respond to a request for comment.

Chinese firms ship precursor chemicals to Mexico that cartels process into fentanyl-like compounds that feed American’s opioid overdose epidemic. Beijing responded to the deal by reiterating existing export restrictions on chemical substances while warning against so-called “long-arm jurisdiction by overseas law enforcement agencies due to the sale of non-scheduled chemicals and related equipment,” said China’s National Narcotics Control Commission in a statement on Thursday. The Biden administration says the deal is already reaping results. “We gave them a list of companies that we know to be engaged in this trafficking of chemical precursors, and they’ve actually taken action to disband these companies,” Secretary of State Antony Blinken told PBS Newshour on Thursday.

LAWMAKERS LASH XI’S CORPORATE LOVE-IN: U.S. corporate titans who treated Xi to a pair of standing ovations at a dinner in San Francisco last week are taking heat on Capitol Hill.  “It is absolutely shameful that American business leaders, including executives from some of the nation’s largest corporations — Apple, Black Rock, Boeing and Pfizer, among others — gave not one, but two standing ovations,” Rep. Chris Smith (R-N.J), chair of the Congressional Executive Commission on China, said in a statement on Friday. None of those four firms responded to requests for comment.

Other GOP lawmakers piled on. “It was shameful that we gave standing ovations … by these CEOs of tech companies to a communist leader of a nation that persecutes its own people,” House Speaker Mike Johnson (R-La.) said, reported by The Hill on Friday. But despite that corporate applause in San Francisco, many companies aren’t buying Xi’s assurances on his country’s business climate. POLITICO’s Gavin Bade and Phelim have the full story here.

PARTING SHOT

TYING THE KNOT… WITH THE UNDERWORLD: Shandong province pledged to eradicate the ancient practice of “ghost marriages” — the custom of marrying a couple, when one or both parties are dead — after a 16-year-old girl’s posthumous marriage sparked public outcry. Sixth Tone has the story.

MANY THANKS: To editor Christian Oliver, reporter Clea Caulcutt and producer Seb Starcevic.

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