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By STUART LAU
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XI’S MISSION POSSIBLE: A physical meeting with the Kremlin’s warmonger, followed by a virtual call with the top guy in Kyiv — call that neutrality with Chinese characteristics. President Xi Jinping is reportedly planning a trip to Moscow as early as next week, according to Reuters and the Wall Street Journal. Beijing has not confirmed or denied the reports, while the Russians have long stated their readiness to host Xi. The Journal also reported that Xi would be ready to have his first phone call with Ukraine’s President Volodymyr Zelenskyy after his Moscow trip. Both U.S. and European officials, conscious of Beijing’s intention to play a part in brokering peace, said they encouraged Xi to open a direct line with the Ukrainian leader. Kyiv has not confirmed such a call will take place.
Big scores for diplomats: Chinese diplomats were especially emboldened by their success this week in brokering a deal between Iran and Saudi Arabia. Wang Yi, the top Chinese diplomat, proclaimed that “the world is faced with not only the Ukraine issue,” as he played the new middleman role in the Middle East. On Taiwan, too, it’s been a diplomatic victory for Beijing this week, as it has seemingly managed to lure Honduras away from Taipei. Announcing the decision on Twitter, Honduran President Xiomara Castro said she had instructed Honduras’ foreign minister “to manage the opening of official relations with the People’s Republic of China.” The headcount of Taiwan’s diplomatic allies will then be down to 13.
TAIWAN GETS FED UP: The EU’s trade focus on China is increasingly a costly burden when it comes to achieving its new political mission of technological sovereignty. Taiwan, which controls the technology producing the world’s most advanced microchips, seems to be having second thoughts about setting up a plant in Europe, after it’s signed deals to do so with the U.S. and Japan, two of its potential security partners in the event of a war with China. As Europe continues to ignore Taipei’s request for an investment agreement, a top Taiwanese journalist in Brussels asks: Why should we share our most prized success with them? We’ll have more below.
CHINA TRIPPING: China resumed issuing visas to foreign tourists this week for the first time since the pandemic began. Welcome back!
GREAT LEAP FORWARD FOR CHINA DIRECT: This is your host, Stuart Lau, and we’ve got some news ourselves this week. From Tuesday March 28, China Direct will grow into a twice-a-week newsletter under the new name, China Watcher. I’ll be writing this expanded version together with my colleague Phelim Kine, based in Washington. We live in a world where geopolitics are shaped and reshaped in Brussels, Washington, and Beijing — and we know how much you’d like a full picture before making your decisions, no matter which government ministry, company, think tank or start-up you’re from. Every Tuesday and Thursday, China Watcher will be in your inbox at 11am CET. Thank you, once again, for all your support over the last two years. (You can update your newsletter preferences here in case you’d rather opt out.)
EU LEADERSHIP SPLIT ON TIMING: Most readers in the Brussels bubble are no stranger to the personality clash at the very top of the European Union’s leadership. The latest rift between Ursula von der Leyen and Charles Michel, presidents of the European Commission and European Council, centers on — surprise, surprise — China.
As von der Leyen headed to the U.S. last week and presented a united front with President Joe Biden, European Council officials rushed to discredit her hawkish stance on Beijing, questioning her reluctance to finalize plans for the next EU-China summit in Beijing.
BIDEN BEFORE XI, SHE INSISTS: According to European Council officials, von der Leyen’s team is lukewarm to the idea of confirming a June summit in Beijing, and insists that the EU should host U.S. President Joe Biden before the two EU bosses travel east.
The problem… is that Biden isn’t expected to be able to come to Europe until June, which makes it logistically difficult to proceed with the China summit plan as originally scheduled.
IT’S A DEEPER RIFT: The two presidents, according to some diplomats, embody a different approach to Beijing, and how to position Europe in the U.S.-China rivalry. Michel is said to favor a less confrontational approach to China, and believes in building up greater strategic autonomy for Europe by not fully aligning with the U.S. Von der Leyen, on the other hand, is less bound by the typically Francophone ideology and prefers a close transatlantic relationship, including on the rhetoric about China.
Others, however, disagree and say the rift is overblown. “The differences between the two are exaggerated,” one diplomat said.
MICHEL SOLDIERS ON: The Council president, speaking at the European Parliament on Wednesday, offered “a few thoughts” on China.
“It is certain that there is no equidistance between the United States and China. We are a strong, loyal and faithful ally of the United States,” Michel said. But, he added, “China is a reality, a fact, a major player on the international stage.”
“That is why it seems to me there are three key elements in our relationship with China. First of all, standing up, eye to eye, when it comes to fundamental values … Then, ensure that we can commit to trying to reduce dependencies which can be costly.”
Now this: “And finally,” Michel went on, “it goes without saying — as I believe no one here doubts it — that there is no other option than to engage with China on global issues, those relating to climate change, those that affect, for example, global health as well.”
My colleagues Suzanne Lynch and Barbara Moens have more.
DE-RISKING? NOT IN SIEMENS’ PLAYBOOK: Christian Bruch, chief executive of Siemens, was visiting Shanghai on Wednesday, Chinese media reported. Contrary to German Chancellor Olaf Scholz’s call on the business community to diversify from China, Bruch had this message for the Shanghai mayor, Gong Zheng: “Our company in Shanghai is a happy ‘corporate citizen.’ We hope to build a seamless supply chain in Shanghai, deepen cooperation with Shanghai in various aspects, and seize opportunities such as green transition.”
ON THE EU CALENDAR TODAY: The European Commission will be publishing a few documents with ramifications on China policy: the Critical Raw Materials package, Net-Zero Industry Act, as well as EU long-term competitiveness strategy.
EIGHT YEARS’ WAIT, AND NOTHING: For years, Taiwan has looked on to see when the EU will start negotiations for a bilateral investment agreement, an idea first floated in 2015. That patience is thinning out this week.
TRIGGER POINT: Gunnar Wiegand, the EU’s diplomatic service’s point person for the Asia and Pacific regions, said last week that there was no pressing need for an investment agreement with Taiwan. “The reason why we do not seek a bilateral investment agreement is because our investors have a good investment situation in Taiwan,” Wiegand told EU lawmakers in a webinar organized by Renew Europe.
WARNING SHOT: The EU can’t expect Taiwan’s microchips industry to invest in Europe if it’s not prepared to strike an investment deal with Taipei, Taiwan’s Central News Agency said on Monday.
In an editorial opinion article, the media slammed the European Commission’s decision not to pursue a bilateral investment treaty with Taiwan. “EU officials may want to bear in mind that the most cost-effective [factory] in the world is located in Taiwan, and that TSMC is setting up [factories] in the U.S. and Japan in response to global geopolitical changes.” CNA is Taiwan’s state media; while it enjoys editorial independence, its view is considered to be in line with the broad thinking of Taiwan’s political and business leaders.
AMBO SPEAKS UP: In a comment to POLITICO, Taiwan’s Ambassador to the EU Remus Chen said: “While the U.S. and Canada are currently negotiating economic and trade agreements with Taiwan, we hope that the EU will also look to adopt concrete and creative ways to deepen its cooperation with Taiwan.”
AT STAKE — A PLANT IN GERMANY: TSMC has been pondering over a plan to build a semiconductor plant in Germany. The latest information from the Taiwanese chip giant is that the plan remains under consideration and “no decision has been made.” Taipei Times has more.
EU RETHINK NEEDED: Bonnie Glaser, a cross-straits expert and managing director of Indo-Pacific at the German Marshall Fund, a U.S.-based think tank, called on the EU to review its attitude to Taiwan.
“Just as the EU has come to recognize that a war in the Taiwan Strait would have an extraordinarily negative impact on its interests and therefore steps should be taken to help prevent it, the EU should also realize that Taiwan’s economic prosperity and security are connected to EU interests. It seems to me like a genuine ‘win-win’ outcome for TSMC to build a fab in Germany, and the EU to sign an investment agreement with Taiwan,”
FRAGILE CHIPS: Worst comes to worst, TSMC plants in Taiwan will just …. disappear. Former Republican top officials are now toying with the idea of bombing the fabs into oblivion should the People’s Liberation Army take over the island. More from Semafor.
CHEERING IN CALIFORNIA: U.S. President Joe Biden hosted British and Australian PMs Rishi Sunak and Anthony Albanese in the U.S. to finalize the AUKUS deal. Here’s the leaders’ three-step plan unveiled under a sunny sky in San Diego:
— Phase 1: U.S. and U.K. submarines visit ports in Australia and embed those sailors into their own forces and nuclear power schools. (Both the U.S. and U.K. already use nuclear propulsion in their submarines, but Australia does not.) Starting as early as 2027, the three countries will participate in a rotational submarine force aptly named Submarine Rotational Forces West.
— Phase 2: Once enough Australians have been trained and the country has enough infrastructure to house many subs, then Canberra will buy three Virginia-class nuclear-powered submarines from the U.S., with the option to buy two more if needed. That’ll take place in the 2030s if both U.S. and Australian funding and infrastructure improvements for American shipyards come through.
— Phase 3: The heart of the agreement takes place late in the next decade. Britain will design and deliver to its own forces a new nuclear-powered submarine class named SSN AUKUS, which will feature Virginia-class technologies from the U.S. Australia will do the same for its navy in the early 2040s based on the same new design.
CHINA CHAFES: The AUKUS defense pact, which will see Australia acquire nuclear-powered submarines and extend the U.K. and U.S.’s tentacles into the Pacific, is ruffling feathers. China’s foreign ministry warned the trio of countries they’d “stimulate an arms race.”
— INDONESIA INFURIATED: Jakarta is also unhappy. Tubagus Hasanuddin, a senior member of the parliamentary committee overseeing defense, said in an interview that the pact “is created for fighting.” The retired two-star army general said Indonesia won’t allow Australia’s nuclear-propelled subs to travel through its sea lanes. AUKUS, Hasanuddin said, is “just like NATO but of a smaller scale, [created] to face the Chinese activities in the Pacific.”
— MALAYSIA MIFFED: Kuala Lumpur’s statement was less fiery, but noted the importance of “refraining from any provocation that could potentially trigger an arms race.”
RISHI BLASTS CHINA (WHILE IN US): China “is a country with fundamentally different values to ours and it represents a challenge to the world order,” U.K. Prime Minister Rishi Sunak told the BBC on his trip to the U.S. “And that’s why it’s right that we are alert to that and take steps to protect ourselves… stand up for our values and protect our interests.”
Now read this: With AUKUS, Britain finds new place in the world at last, my colleagues Rosa Prince and Cristina Gallardo report.
TOKYO-SEOUL DETENTE: Japanese and South Korean leaders are visiting each other for the first time in 12 years, after recent agreements to settle a decades-old dispute over compensation for Japan’s war-time practice of using Korean women as sex slaves. The fact that two of the U.S.’ closest Asian allies are warming up is not good news for China — not to mention Seoul’s plan to join the U.S.-led defense pact Quad.
CAMBODIAN BASE IN SATELLITE IMAGE: China’s secret naval base in Cambodia has been revealed through satellite imagery. More on Naval Technology.
EU-THAILAND TALKS RESUME: The EU and Thailand are relaunching negotiations on a free trade deal, the European Commission said Wednesday. The announcement, which confirmed an earlier report by POLITICO, follows a virtual meeting between EU trade chief Valdis Dombrovskis and Jurin Laksanawisit, Thailand’s deputy prime minister and minister of commerce. “A modern, dynamic EU-Thailand [free trade agreement] would benefit both sides & strengthen/diversify EU trade ties with Indo-Pacific,” Dombrovskis said on Twitter.
Timeline: Brussels froze trade talks with Bangkok following a military coup in 2014. While EU countries gave their green light for resuming trade negotiations in late 2019, they hadn’t officially begun until now. The military junta is still around — but there’s a renewed push by the Commission to step up deals with the Indo-Pacific to lessen dependency on China.
MANY THANKS TO: My editor Christian Oliver, Zoya Sheftalovich, Alex Ward, Pieter Haeck, Leonie Kijewski, and producer Dato Parulava.
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