“Charm Offensive” Falters

China’s international charm offensive is facing challenges as reality hits policymakers and the public in anticipation of the upcoming meetings. Hardline policy is to remain intact after the upcoming 20^th Chinese Communist Party Congress in October, according to Chinese officials. Policy makers in Beijing are offering public statements emphatically ensuring the world that the country’s policies toward Taiwan and other issues will remain aggressive and that Beijing is not softening despite calls for reform. Ma Zhaoxu, China’s Deputy Foreign Minister, signaled that there will be “no change” in China’s “assertive diplomacy” after the meeting this month.

US Ambassador to China, Nick Burns, says that China’s position is endangering a peaceful solution to the Taiwan issue and destabilizing the region. He called out Beijing, saying “If anyone here changed their policy, it really is the People’s Republic of China, with their overreaction…” to the visit of Rep Nancy Pelosi, according to Burns. Washington, he says, is not altering its one China policy and will continue to compete with China.

On Wednesday, in advance of the party meetings, Chinese state media reported that Chinese Premier Li Kejiang announced Beijing is set to move forward with its domestic economic policy program during the last quarter of the year claiming the country has recovered from Covid. He suggested the country’s economy now is stable. Since May Beijing has been cutting taxes and infrastructure spending in an attempt to revive the economy crippled by its zero-Covid policy and property crisis.

A Caixin investigation, according to James Palmer writing in Foreign Policy, says that that local governments are filling the financing hole created by the collapse of the real estate market with a desperate measure. “Local government funding vehicles, which sell municipal bonds, are being pressured to get into business themselves and buy land from the government. Not counting taxes, land sales made up 42 percent of local government revenue in 2021—up from just 5.9 percent in 2000.” He points out that there no way local government funding vehicles can fill this gap as there is no demand from buyers, who are waiting for the state to allow prices to fall.

On Monday the yuan, despite efforts by the People’s Bank of China, hit a 28-month low against the dollar. The leadership in Beijing may find it embarrassing as it typically associates a strong yuan with a strong balance of economic power with the United States. The World Bank recently slashed its prediction for China’s GDP growth from 5 percent in the spring to 2.8 percent. The reaction among Chinese is that the country is a falling into a recessionary period when it fails to meet government growth targets.

Corruption also continues to impact Xi’s ability to continue domestic reforms. Beijing announced Monday that the “godmother” of China’s shipping industry, Li Li, a former Communist Party chief and president of the Beijing branch of the Export-Import Bank of China was recently expelled from the CCP, removed from public positions, and turned over to prosecutors on corruption charges. Coupled with weak demand for shipping this year, Xi faces a number of challenges at the upcoming party meetings.China’s foreign policy also faces challenges. A senior official in Taiwan, Deputy Minister of the Mainland Affairs Council Chui-Cheng Chiu, warned on the Wednesday “ Chinese President Xi Jinping is embracing an extreme form of “closed door nationalism” and “totalitarianism” that threatens Taiwan’s future. Chiu’s statement comes amid increased cross-strait tension as officials in Taiwan anticipate that Xi will continue to consolidate power and threaten to reclaim control of Taiwan. All of this comes amid news that BA.2.75.2, the new Omicron strain found in China is showing a worrying ability to evade immunity. Xi intends his legacy to be the return of Taiwan. His path forward is becoming less clear as some analysts report China’s economy may never take over that of the United States. Neighboring states, once friendly to China, also are rejecting overtures from Beijing as Xi seeks to realign the world in favor of the communist giant’s view of the international order. The upcoming Chinese Communist Party Congress may not go as well as Xi Jinping hopes, although analysts suggest he will continue to consolidate his power.

Daria Novak served in the U.S. State Dept.

Illustration: Pixabay

Quick Analysis

Russia Expanding Aggression

President Putin is using more than one pathway to enter Europe and undermine the West. While most of the world watches the conflict he initiated in Ukraine, the Russian government is actively pursuing a second front in a little noticed campaign in Cyprus. Although the corrupt Cypriot government ended its issuance of “golden passports” in 2020, Russian intelligence is functioning quietly there to transform this EU country into a Russian beachhead of illicit economic activity aimed at penetrating the capitalist West, according to Paul Goble of the Jamestown Foundation. Cyprus is not a member of the North Atlantic Treaty Organization (NATO) nor does it receive as much attention as those countries who are member states. That adds to its allure as a prime location for Russia to attempt to gain a European foothold. Last week a NATO report, cited in the European Daily Monitor, noted that Russian intelligence agents have been plotting to destroy European infrastructure across the continent to disrupt states supporting Ukraine. It further suggests that Putin’s immediate goal is to lay the framework for a future move against the security organization’s members. Hungary, in particular, is another country garnering Moscow’s attention as it opposes the Western response to Russian aggression. Russia is focusing its intelligence efforts on other European, non-NATO member countries in addition to Cyprus, including Austria, Malta, and Ireland. The NATO report suggests that Moscow has had success in disseminating the Russian political narrative in these states to advance its campaign against the West. The island of Cyprus is proving to be a good target for Moscow as it is an ethnically divided island that is part of the EU since 2004. Northern Cyprus, officially called the Turkish Republic of Northern Cyprus (TRNC), is a de facto state that is only recognized by Turkey. The division precludes it from joining NATO. As Goble suggests, “it offers Russia troubled waters in which to fish.” Over the last 20 years, he points out, Cyprus’ challenges have opened it to a massive influx of Russian citizens, who now comprise approximately 10 percent of the island state’s population. Over 2,900 residents are Russians who entered until the “golden passport” program that allowed wealthy or well-connected Russians to move to Cyprus. It also provided them with documentation to travel freely throughout Europe! Although less visible on the world’s radar than the war in Ukraine, Moscow is also being helped by Cyprus’ banks opposition to seizing Russian assets and its support in evading Western sanctions. Russia has placed tens of billions of US Dollars there for money laundering. It has been more than two years since a single Russian “diplomat” has been deported and, in fact, the Embassy has grown to over 300 staffers on this tiny island state of only 1.2 million people. The Russian embassy in Nicosia has advanced communications antennae on its roof and opened a consulate on the northern end of the island. Moscow’s Ambassador, Mura Zyazikov, is a lieutenant general in the FSB with no diplomatic experience. The FSB, SVR (Russia’s Foreign Intelligence Service), and GRU are actively using the island as a base of operations against NATO Member states, Israel, and other Western allies. Moscow backs pro-Russian political parties who in turn influence Cypriot decisions on education, language, and other issues. “Dmitry Khmelnitsky of the Dossier Center says that its findings should be of concern not only to Cyprus but to the West as a whole. Those who ignore what Moscow is doing because Cyprus does not follow the EU sanctions regime are missing something critical,” says Goble. “Cyprus does not seek to get rid of Russian agents and does not interfere with their work,” Khmelnitsky concludes, “despite the fact that what the Kremlin is doing is so clearly visible.” This has an impact not only on the small island but on the EU, NATO, and the West in general. Earlier this year the Moscow Times reported that when the FBI became more interested in Russian business and oligarchs in Cyprus, at least 10 of the major Russian businesses operating there left. Despite the government of Cyprus’ vow to implement plans for new sanctions against Russia, it continues to ignore Putin’s atrocities in Ukraine and to shield the wealth of the 50,000 wealthy Russian citizens and oligarchs residing there. Daria Novak served in the U.S. State Dept. Illustration: Pixabay