Beijing Restricts Exports Related to National Security; China Joins COVAX

October 21, 2020 Comments Off

Originally published by Lawfare on October 21, 2020

Beijing Restricts Exports Related to National Security

On Oct. 17, the National People’s Congress Standing Committee passed a new law to control exports of sensitive goods, which will apply to all companies in China. The law is focused on “dual-use” goods—products that are usually used in civilian contexts but also may serve military functions.

Some analysts worry that the law may extend to China’s rare earth metals. China holds a majority of the worldwide supply of 16 raw minerals critical to the production of automobiles, smartphones and missiles. A Beijing restriction of rare earth metal exports has long been feared in the U.S.-China trade war.

The law, which specifies the ability to take “reciprocal measures,” has been interpreted as a precursor to retaliation against the United States for U.S. treatment of Chinese chipmaker Semiconductor Manufacturing International Corporation (SMIC), as well as tech giants Huawei, ByteDance and Tencent. DLA Piper notes that the final version of the new law has replaced the phrase “national security” (used in earlier drafts) with “national security and interests,” thereby broadening the grounds on which export controls might be justified. The language in the Chinese law is nearly identical to that of the U.S. export controls system, which states: “The United States imposes export controls to protect national security interests and promote foreign policy objectives.”

Since the new regulation on exports extends to the tech sector and includes user data and source code as controlled items, its reach raises more questions about ByteDance’s proposed partial sale of its popular mobile app, TikTok, to Walmart and Oracle, which must be approved by Chinese regulators.

Those who breach the law could be subject to criminal charges, with penalties up to 20 times the value of any putative illegal business transaction. The law is anticipated to go into effect on Dec. 1.

China Joins COVAX

After initial hesitation, China signed on to the global coronavirus vaccine alliance known as COVAX on Oct. 9, making it the biggest economy to join the initiative to date.

Analysts see the action as a strategic move in China’s bid for global leadership and portrayal of its successful response to the coronavirus. Chinese state media continues to tout President Xi Jinping’s leadership in the fight against the virus. Reports of infections in China remain relatively low, and China’s response to minor outbreaks—such as the recent cluster of infections found in the city of Qingdao—has been robust. On Oct. 11, China announced plans to test all nine million residents of Qingdao for the coronavirus. Recent economic data shows the Chinese economy rebounding from its virus-induced slump, though growth remains slightly lower than predicted.

The United Nations describes COVAX as a “pooled procurement mechanism” designed to ensure equitable international distribution of a coronavirus vaccine. Through COVAX, wealthy nations contribute funding for vaccine research and development. If a successful vaccine is discovered, some COVAX signers have also pledged to distribute the vaccine through COVAX’s approved channels, so that lower income countries are guaranteed to receive proportional numbers of doses.

More than 156 nations have agreed to fund or participate in COVAX. Among the world’s most powerful nations, the United States and Russia are now alone in their abstention.

U.S. and Chinese Policies Impact Global Internet Freedom

Freedom House’s “Freedom on the Net 2020” report, released this week, rated China as having the world’s least free internet for the sixth year in a row. The annual report monitors the state of internet freedom in 65 countries around the world, scoring each country on obstacles to internet access, limits on content and violations of user rights. According to the report, internet freedom in the United States also declined in 2020 for the fourth year in a row, due in part to the federal government’s restrictions on the U.S. operations of Chinese internet companies TikTok and WeChat.

Though the number of people in China with access to the internet is growing, Beijing continues to score low for its limits on online content and violations of user rights. The coronavirus pandemic created an incentive for the Chinese government to increase its online monitoring through “automated censorship, high-tech surveillance, and large-scale arrests.” In May 2020, China Human Rights Defenders collected 897 documented cases of internet users in China being punished with warnings, fines, administrative detention or criminal charges for publishing material related to the coronavirus.

The United States ranked seventh in the world for internet freedom. However, its “Limits on Content” score dropped from 2019 due to new restrictions on Chinese companies TikTok and WeChat, increased surveillance of protestors and the Trump administration’s moves to weaken legal protections for social media platforms. Trump’s May 2020 executive order titled “Preventing Online Censorship” attempted to limit legal protections afforded to social media companies under Section 230 of the Telecommunications Act of 1996, which protects online platforms from liability for content their users share.

Freedom House noted that the decline of internet freedom in the U.S. and China has spread to other countries as governments “learn from one another, copying restrictive policies and actions from foreign states to implement at home.” This year, the largest declines in internet freedom occurred in Myanmar and Kyrgyzstan—two nations involved in China’s Belt and Road Initiative. Freedom House encouraged democratic nations to “[l]ead by example,” or else run the risk that less free governments will “cite the actions of democracies to justify their own repressive policies.”

Beijing Said to Ban Australian Coal; Bilateral Relations Remain Tense

On Oct. 12, the Chinese government reportedly banned new purchases of Australian coal. The Chinese government allegedly has also instructed ports, mills and other industrial plants to stop using their current stocks of coal from Australia. Beijing has yet to confirm the rumored restrictions. Financial analysts have interpreted the reported ban as retaliation for Australia’s recent passage of stricter foreign investment approval regulations. Australian Prime Minister Scott Morrison has denied suggestions that the new investment approval regime is directed against China.

These actions follow a recent pattern of bilateral difficulties: the ban of Huawei from Australia’s 5G network in 2018, mutual allegations of espionage and influence-peddling in 2019, and trade spats during the spring of 2020. Most recently, Zhenhua Data, a Chinese company with links to China’s Ministry of State Security, was reported to have secretly compiled open-source data on approximately 35,000 Australian citizens, including prominent military figures. And on Sept. 8, the Australian government flew two Australian media journalists back from China after the journalists were interviewed by Chinese police; days later, Australian security services raided the homes of four Chinese journalists working in Australia.

Meanwhile, U.S.-Australia cooperation continues apace. On Oct. 6, the foreign ministers of the Quad—the United States, Australia, India and Japan—met for a summit in Tokyo. Some commentators speculate that the United States and Australia are seeking to transform the consultative body into a collective security apparatus akin to NATO. And some analysts believe that Australia’s willingness to alienate China in favor of closer ties with the United States is ill advised, as China accounts for more than a third of Australian exports, particularly in coal and iron ore. The Australia-China relationship is partially credited for Australia’s unusual economic stability.

Polling suggests that Australia’s China policy is following public sentiment. According to the Pew Research Center, in the past three years, the proportion of Australians with favorable views of China has slumped from 64 percent to 15 percent—the most significant negative shift among the countries surveyed. Scholars are calling the current situation the “lowest ebb in decades” for Australia-China relations.

Fu Ying, the prominent diplomat and former Chinese ambassador to Australia, is urging dialogue to “get out of the current dilemma.”

Other News

Canada and the United States Offer Support to Hong Kong Residents

On Oct. 16, top officials in Canada and the United States reiterated support for Hong Kongers seeking to emigrate after Beijing’s imposition of the Hong Kong National Security Law, which came into effect on June 30. On Oct. 2, the U.S. State Department added Hong Kongers to its proposed list of refugee applicants receiving special priority for admission. These words of welcome echo a broader policy implemented by the United Kingdom in July, which extended visa rights and offered a path to citizenship for more than 3 million Hong Kong residents.

U.S. National Security Adviser Robert O’Brien, speaking on Oct. 16 at an online event hosted by the Aspen Institute, reiterated U.S. willingness to accept individuals leaving Hong Kong. “It’d be great if we had more immigrants from Hong Kong,” he said. “They’re terrific people.” In his statement, O’Brien also highlighted Chinese treatment of Uighur Muslims, stating: “[I]f not a genocide, something close to it is going on in Xinjiang.” Increased American willingness to use condemnatory language on Xinjiang comes amid a rise in the Trump administration’s hawkish rhetoric toward China in the weeks before the U.S. presidential election.

Canada’s response comes after Cong Peiwu, China’s ambassador to Canada, suggested that, if Canada “really cares about the good health and safety” of the 300,000 Canadian passport-holders in Hong Kong, it ought to support China’s crackdown on “violent criminals,” referencing pro-democracy protesters. Cong’s statement was interpreted as a “veiled threat” by some Western analysts. In response, Canadian Prime Minister Justin Trudeau promised to continue speaking out on the human rights situation in Hong Kong and against China’s “coercive diplomacy.”

ByteDance Files for Second Injunction

On Oct. 14, ByteDance filed a motion for a preliminary injunction with the U.S. District Court for the District of Columbia to block the Trump administration’s impending prohibition on domestic transactions with TikTok. The administration’s ban is set to take effect on Nov. 12.

On Oct. 15, TikTok’s global chief security officer filed a supplemental declaration with the court, alleging that the Trump administration has mischaracterized TikTok’s use of third-party servers in the United States and China. According to TikTok, the company prevents U.S. companies from which it leases server space from accessing its software environment, and it has no active connections with servers in China. The filing also stated that TikTok’s source code and user data are stored separately from the code and data of other ByteDance apps.

This is the second injunction for which ByteDance has filed in U.S. courts in recent weeks. The first, which stays another Commerce Department ban on new downloads of TikTok from U.S. app stores, was granted on Sept. 27. Judge Carl Nichols of the D.C. district court, who is presiding over both cases, has expedited the government’s appeal to the injunction against the downloads ban and will hold a hearing on Nov. 4. Oral arguments are set to begin on Nov. 12.

Commentary

On Oct. 16, Google released new details about the group of Chinese hackers known as APT31, which has targeted the Biden and Trump campaigns with phishing attacks designed to install malware on campaign staffers’ computers.

China has issued multiple warnings to the U.S. government to drop the Department of Justice’s prosecution of Chinese academics, or else face the possibility of U.S. citizens being detained in China, the Wall Street Journal reports.

The Berlin-based Mercator Institute for China Studies (MERICS) published a timeline of major events in the 100 days since new national security legislation was imposed on Hong Kong. MERICS’s chief economist writes about Hong Kong’s prospects as a financial hub. The State Department has issued a sanctions warning to banks transacting with individuals potentially responsible for China’s actions in Hong Kong.

Mishaela Robison and Jack Karsten write for Brookings on the implications of the TikTok battle for the future of social media in the United States. Erol Yayboke and Samuel Brannen published a CSIS Brief on the rise of digital authoritarianism, implications for U.S. national security and potential policy recommendations to counter current trends.

The Global Commission on the Geopolitics of Energy Transformation estimates that China accounts for nearly half of all global investment in renewables. Scott Moore writes for Lawfare on the impact of China’s climate commitments on U.S. national security. Yanzhong Huang argues in the New York Times that continued U.S.-China economic decoupling will complicate U.S. efforts to influence Beijing’s environmental policies. Anjani Trivedi writes for Bloomberg that China’s most recent five-year plan increases the likelihood of competition with the United States in “all things green.”

Catherine Putz analyzes the diplomatic shifts evident in two recent, dueling letters presented at the U.N., with one supporting and one condemning China’s security policies in Xinjiang and Hong Kong.

Lauren Dudley for the Council on Foreign Relations explores Huawei’s recent expansions in Russia in reaction to geopolitical technology tensions with the United States and Europe. Lauly Li and Cheng Ting-Fang write for Nikkei on the U.S. campaign to cut China out of global technology supply chains.

On Oct. 19, Brookings hosted the capstone event to its two-year series on China’s growing role in the international system. In the lead-up to the event, Robert D. Williams published a report on China’s compliance with and influence over international law, and another Brookings team completed a study on China’s approach to global governance and norms.

Julian Gewirtz in Foreign Affairs analyzes China’s perspective on U.S. global leadership. In a podcast episode with the Hoover Institution, former U.S. Secretary of State George Shultz discusses China’s global leadership and economic prospects, as well as the future of the Quad. The Center for Strategic & International Studies released a podcast episode interviewing Michael J. Green, director of Asian Studies at Georgetown University’s School of Foreign Service, on the future of U.S.-China relations.