Shane Leary joins Miles Yu for a conversation on Biden’s Busy Weekend at the G20 Summit in New Dehli and his visit to Hanoi, Vietnam. They then discuss the latest development in US-China tech competition, the new Huawei Mate 60 Pro, a source of controversy and concern over the current chip export controls in place. Finally, Miles offers his thoughts on a proposed law in China which would punish citizens for statements and clothing deemed “detrimental to the spirit of Chinese people.” Follow the China Center's work at https://www.hudson.org/china-center
Shane Leary joins Miles Yu for a conversation on Biden’s Busy Weekend at the G20 Summit in New Dehli and his visit to Hanoi, Vietnam. They then discuss the latest development in US-China tech competition, the new Huawei Mate 60 Pro, a source of controversy and concern over the current chip export controls in place. Finally, Miles offers his thoughts on a proposed law in China which would punish citizens for statements and clothing deemed “detrimental to the spirit of Chinese people.”
Follow the China Center's work at https://www.hudson.org/china-center and subscribe to our newsletter China Digest.
Miles Yu:
Welcome to China Insider, a podcast from Hudson Institute's China Center.
Shane Leary:
It's Tuesday's, September 12th and we have three topics this week. The first is Miles Reflections on the G 20 summit and Biden's visit to Vietnam. The second is the new and infamous mate, 60 Pro smartphone released by Huawei and what this means for US-China tech competition. And third is a new law being drafted by the CCP, which would punish Chinese citizens for clothing that offends the regime. Miles, how are you?
Miles Yu:
Very good, Shane. And before we go into our discussion today, I'd like to thank our listeners for their support for our programs. We've also produced the two episodes in Chinese, that's monthly, so we got tremendous response from the listeners. Thank you very much, and we'll keep doing what we're supposed to be doing and improve with your support.
Shane Leary:
We appreciate the support so much. Like Miles said, if you want to check these out, they're available not only on hudson.org at our website, but also on Hudson Institute's YouTube channel. So for our first topic today, miles, we're coming out of a busy weekend for President Biden. The G20 took place this past Saturday and Sunday and immediately afterwards, Biden left India for Vietnam where he met with General Secretary Nan Ong. During both visits, Biden's message to our allies and partners was one of trying to thread the needle between emphasizing the need to stand up to Chinese aggression, but seemingly trying to avoid criticizing the CCP too drastically. At the G20, he stated, “I don't want to contain China,” but he emphasized the need for the US-China relationship to be one that is “on the up and up and squared away.” He followed this by stating countries like India and Vietnam ought to be much closer with the United States and have a deeper cooperative relationship. What are your thoughts on the G20 summit and Biden's trips to Vietnam? Did anything in particular catch your eye and how effective do you think Biden's messaging strategy is to countries in the region?
Miles Yu:
China always say the source of today's problem that China faces is really United States. This is not necessarily true, as you can see from this trip. China's problem goes far beyond the US-China domain. It is China faces a lot of countries, particularly its neighbors. There's no two countries there are more hostile to China than India and Vietnam. Those are two countries that China have fought the wars with over the decades. With India, the clashes were absolutely tense since particularly June, 2020. AK clashes were lives were lost, and with Vietnam it's ongoing. I mean, since 1970s, China has launched no fewer than six military actions against Vietnam, ranging from full-scale invasion in February, 1979 to decades long shelling and harassment of Vietnam in the 1980s. So even today, China's claim in South China Sea has generated enormous resentment from the countries in the region. The leading, most defined country against China's claim in the South China in Southeast Asia is Vietnam. So this is something that President Biden went to these two places and to secure American support for these two countries. So, it's actually a very important message as to whether there should be a contaminant policy towards China or not. This is not basically how outside countries wants to contain China. It's being contained by its own behavior by other countries. Everybody is careful and keep a watchful eye on China's revisionist ambition.
Shane Leary:
I want to press a bit further on something Biden announced at the G20 summit that is the unveiling of a new economic corridor linking India, the Middle East and Europe. In other words, what seems to be something like a US answer to the Belt and Road Initiative? This was announced alongside leaders of India, Saudi Arabia, the U A e, France, Germany, Italy, Japan, and the European Commission, and it states it will involve massive infrastructure projects such as new railways, shipping lines, high-speed data cables and energy pipelines. Could you shed some more light on this project and at this point, are you optimistic about its success?
Miles Yu:
Well, it's remained to be seen. The leading force behind this is India. India wants to replace China as the force of goodwill to create a connectivity between India subcontinent and this Arabian Peninsula and Europe, and this is ambitious projects is based upon transparency, based upon good investment without any debt entrapment, and this has a strong support of the United States. Remember, the India-Middle East-European corridor project also included the United States in it. This is a very significant movement. We don't know how much economic investment this actually will involve, or in what form. I think this is the announcement of great importance. The details are still to be seen nevertheless is a big one.
I just want to circle back a little bit more. G20 is important. G20 shows that China is pretty isolated on most the international issues, but one very important stop during this presidential trip is actually Vietnam. No country knows China's playbook better than Vietnam. Both Vietnam and China are communist country, communist country follow the same Marxist-Leninist ideology when it comes to military and strategic culture. They know exactly each other's playbook. For example, one very important part of the modern warfare is political warfare and psychological warfare. No country in the region in the world, as I say, knows China's operational ethos of political warfare better than Vietnam because they are graduated of the same school. What worries the Chinese Communist party more than anything else is the possibility. That nightmare scenario that Vietnam would sign a mutual defense treaty with the United States just like the Philippines, South Korea, and Japan. That will be a very serious security challenge for China. And don't forget, it was a signing of the Mutual defense treaty between Vietnam and the Soviet Union in November 1978 that prompted China to launch a blitzkrieg, a full-scale war against Vietnam only about three months later in February 1979.
This is something that China has to worry about, and this trip has elevated the US-Vietnam relationship to what's called strategic partnership. By the way, this US policy, this US rapprochement tour, Vietnam is completely bipartisan, not only Republican support, the Democrat supported too. As a matter of fact, it is President Obama who lived the weapons embargo against Vietnam that will have been imposed in aftermath of Vietnam war. Japan has even gone further. Japan is a country that has a very strong pacifist tradition, has promised Vietnam that Japan will now allow its transfer of Japanese manufactured weapons to Vietnam to convert China. That is significantly development. So Vietnamese-US relationship is actually very important new cornerstone in securing their peace and stability in the entire Southeast Asia. It's significant.
The Trump administration also places a very important premium on developing and deepening US Vietnam relationship. If you recall the second meeting between President Trump and North Korean dictator, Kim Jong-un was held in Hanoi. Secretary of State, Mike Pompeo is the last trip to a foreign country while he was Secretary of State was to Vietnam, and I was on that trip. It was during the height of the Covid. The two countries develop a very common understanding of the common threat failed by both countries, but I think right now the kind of animosity between China and Vietnam, in addition to ideological strife, it's a more traditional Chinese chauvinism and Chinese its own version of imperialistic hubris.
Shane Leary:
In another development following the most recent round of export controls, which sought to limit the PRCS capacity to gain access to high-end chips, Huawei seemingly out of nowhere quietly launched the new MATE 60 Pro, which uses an advanced seven nanometer processor that they claim was manufactured completely in-house by SMIC, China's top chip manufacturer. This has been met with a flurry of competing opinions, some who say this is a sort of damning development for the US smartphone industry showing China's capacity to compete effectively without importing chips. Others who question whether they actually did develop this technology themselves suggesting the PRC is finding ways to skirt around export controls, and then some who simply question how advanced this new phone really is. Miles, could you clear this up for us? What are your thoughts on the new Maid 60 Pro and how significant is this from the standpoint of both competition with China and the tech sector and the export controls we have in place?
Miles Yu:
The rollout, the Huawei is the Mate 60 Pro is timed with the Secretary of Commerce Raimondo's visit to China, and it was supposed to be a humiliation for Raimondo stating that the US blockade of chip import to China has failed. Huawei even put out a mock image of Secretary Raimondo in its rollout promo, so it's actually pretty nasty. However, Huawei's claim of excellence is suspicious, as the functionality and technical capabilities are uncertain at this point. Some Taiwanese testers show spotty excellence in the phone, but also there's some kind of overall sort of backwardness in terms of functionality.
It was also used as a political game to kick out Apple's market share inside China. Simultaneous with the role of the Huawei Mate 60 Pro is Chinese government new ban on Apple iPhones in China, in government agencies, government bureaucrats, bureaucratic layers, and all level used to be just the central government. Now all layers of Chinese government, local, provincial, they're not allowed to use iPhone and also many of the huge state-owned enterprises, their employees were not allowed to use iPhone. So this is basically another example of China using political gimmicks to dictate economic operations. But most importantly, the reason iPhone is popular even among the Chinese citizens, not just because it's a good phone, but mostly because it's a safer phone. Huawei is totally integrated into Chinese surveillance system. If you get Huawei, you'll be monitored, you'll be controlled by the CCP sensors. China, to fan nationalism is to substitute xenophobia for personal information, security concerns. Some clever Chinese, as a matter of fact, more and more Chinese are now having two phones, one Huawei phone to show your patriotism and love for the party. Another one is iPhone to protect your privacy and key financial and even medical information, this is the way to bypass that kind of control.
Now my view is that China has tried to escape US chip ban on Huawei and using various schemes. One of them is just the outright stealing. They steal chips and chip making technology from countries with good trader relations with the United States. It has been found that in the Huawei Mate 60 pro are chips made by South Korean form of SK Hynix. Hynix chips end up somehow in Huawei reform. That is not China's chips, it's not Chinese made. It's made by South Korea. So the South Korean firm, SK Hynix, was horrified by this discovery and rushed to file an explanation to the US Commerce Department assuring US government that they had complete compliance with the US export control to China.
The second thing is China basically literally just bribe the third countries, not banned by the US to buy high-end chips for Huawei, and this is another way to sort of skirt the US export control, the most suspicious case is Malaysia. According to United Nations statistics, for example, in 2022, Malaysia suddenly increased its purchase of semiconductor manufacturing equipment from the United States, Netherlands, and Japan by about $580 million. The funny thing is, in that year 2022, Malaysia's export of semiconductor equipment to China also increased by precisely the same amount, about $590 million. So this is very suspicious. Another way is basically because of the export ban, there has been a huge black market, companies registered in India, Taiwan, and Singapore, and they buy a lot of American companies high-end chips, particularly the artificial intelligence chips are made by Nvidia and they will sell those chips to the Chinese companies at a price several times higher than their purchase prices. So there is a profit to be made there.
To be honest, Chinese government has dealt out enormous amount of money to steal talents from international chip making companies. China has been rigorously recruiting chips and semiconductor researchers and engineers through its state sponsored talent recruiting program. China used to have one called a thousand talent program that one has made the international backlashes so severe that China has to hide that program and continue under a different name. It's called Qiming program. Under Qiming, for example, Huawei company alone has received reportedly $30 billion from the Chinese government to purchase overseas chip making companies and to recruit chip talent. So all in all, the export control has to be incorporated with the international plan and otherwise it's not going to work. So far, I think the commerce department is investigating the Huawei's new phone and to make sure that it's claim, whether it's right or wrong, to get to the bottom of it. Another thing is to really understand where the China get the chips from overseas. It is not a terrible phone, it is not the excellent phone, but nevertheless, it's something for us to be worried
Shane Leary:
For our last topic, the CCP is considering a new law which would ban both speech and clothing deemed detrimental to the spirit of Chinese people. This has caused quite a bit of debate inside China with citizens especially concerned at the breadth of the prohibition pointing out the current draft of this law is altogether unclear on what exactly would constitute a violation as the law is currently being considered. Offenses will be met with up to 15 days of detainment and fines of up to 5,000 yuan or a little under 700 US dollars. One social media user on the platform Weibo sarcastically asked whether wearing a suit and tie would count or if they should avoid foreign ideologies such as Marxism. Some incidents in recent months which might shed light on the impetus of this new law, include a woman being detained for wearing traditional Japanese clothing and people being denied entry to a concert for wearing rainbow clothing. Specifically on one hand, I wonder how much this would currently change the legal situation in China given that citizens are already routinely punished for criticizing the party, and two, doesn't this smack of a sort of desperation, fragility on behalf of the party?
Miles Yu:
China is not a country of law. China has never had a rule of law under the communist regime. So Chinese government can do anything legally to conduct all kinds of illegal, immoral, and inhumane acts against its own citizens. But Chinese government also understand the usefulness of the legality guise. So that's why they try to basically know to rule the nation through all kinds of draconian laws regulating every single aspect of human behavior. This is another example. This is a new draft law that aims to regulate basically the basically human actions from how you walk, how you talk, or how you dress. Everything now the cop would have a legal document to say, “listen, I'm arresting you because I don't like the way you dressed up.” And this also created enormous incentive and impetus for corruption because much of this punishment law, the draft involves financial punishment and that gives the local police, local government a great legal tool to extract money from its citizens. It's a very terrible incident and I think it has a great backlash already inside China. Many citizens, of course, they cannot openly challenge the law, but they do all kinds of mock, jokes, and jury. It shows that how out of touch the government is to the feelings of the Chinese people. Chinese government always say whatever in the US does, whatever in other countries do hurt the feelings of Chinese people. There's no political entity that hurts feelings of Chinese people than the Communist party itself. So this is the irony of the century.
Shane Leary:
Well, Miles, I think that's all the time we have for this week. Thanks so much for taking the time to speak with me and I look forward to doing this again next week.
Miles Yu:
Thank you very much, Shannon.
Shane Leary:
Thanks for listening to this week's episode of China Insider. For Chinese language listeners, be sure to check out our monthly Chinese language episodes, and for those who prefer written analysis, subscribe to our weekly newsletter China Digest, the best place to stay up to date on miles analysis and the latest news on China. As always, you can stay up to date on the China Center's activities at www.hudson.org.