Foreign Affairs Magazine’s Post

Sharing latest piece in Foreign Affairs Magazine with my wonderful Council on Foreign Relations co-author and colleague, Dr. Liana Fix: As a result of Beijing’s support for Russia’s war machine—and its conquest of the European car market—Beijing has become a major challenge for Europe. How should the European Union respond?

In our strategy discussions with client, the Ukrainian war has been one of the biggest geo-political events of the past two years. The conflict has thrown the world into war-media mode, business leaders need to see beneath the veneer or hazy cloud of misinformation pushed by both sides of this epochal war. It is against this backdrop that I evaluated Statista's 'chart of the week' (see link at end of post) showing how average monthly exports from Germany and Italy to Kyrgyzstan has increased by circa 2,000% since the Ukraine war started. IMF data shows similar patterns of unusual growth in German and Italian exports to Armenia, Kazakhstan and Georgia and across Central Asia. A report by the Brookings Institution concludes that "this export boom is so large that it cannot conceivably be targeting domestic demand" in those countries, an indirect way of confirming that these two large European countries are still exporting to Russia using these smaller countries as proxies. Brookings goes further, "this export boom began immediately after Russia invaded Ukraine and is so massive that transshipments to Russia are the only credible explanation" Where does this leave Nigerian companies, whose businesses have been significantly impacted by the sanctions on Russia, but who don't have the sophistication to trade through proxy countries? https://lnkd.in/dsfwBVYK https://lnkd.in/dBNQKYgQ

China can say whatever they want telegraphing their position to the US as well as propaganda footage for home soil. This US trip is part of formality and protocol before the US tighten the noose. It is the last warning to China on its full embrace policy of Russia. Many forget how vulnerable China is given its dependence on FDI and exports. China unlike the US cannot survive as an economic island. It imports everything from food to commodities and it’s competitive advantage is its manufacturing platform which is already under pressure from nearshoring, offshoring and geographical diversification. Some would argue about Chinese companies are setting up manufacturing base outside China but the net effect of this is the start of the gutting cycle of Chinese manufacturing base. The West has already been through the gutting cycle of its industrial base over the last 30 years.

Very important. One reason it is so difficult to force China’s hand is that the longer the Ukraine was goes on, the weaker Russia gets, which is in China’s long term interests. The ultimate collapse of Putin’s government will give China the opportunity to take back much of Siberia and create a one-time opportunity for China to stock up on Russia’s massive stockpile of nuclear warheads.

Why haven’t the international penalties knocked Russia out of Ukraine? The answer often comes down to two factors: political will and technical ability. It’s hard for one government to pressure another to stop buying Russian products if it needs that country’s cooperation on other fronts. Washington doesn’t want to strong-arm a potential partner against China like India; Brussels doesn’t want to alienate Turkey in the Middle East. #Indonordicassociation(dot)org Indo Nordic Strategic Association, India https://lnkd.in/dQWDaXet

🇪🇺 The EU is facing a major geopolitical challenge: Is Turkey a Trojan horse for Chinese companies?   Turkey plays a complex strategic role as a NATO member and historical partner of the West, but its economic ties with China are becoming ever closer. This could pose a major challenge for the EU.   As Francesco Galietti, PhD explains, two elements must be closely observed:   1️⃣ Chinese investment: a breath of fresh air for Ankara. With inflation exceeding 60% and the need for reconstruction after the earthquake, Turkey is looking for strategic partnerships. The agreement between Ankara and the Chinese car manufacturer BYD shows that China is taking advantage of this openness. In exchange for investment, Chinese companies that set up in Turkey will receive lower tariffs. 2️⃣ EU-Turkey Customs Union: Leverage for China. Thanks to the customs union between Turkey and the EU, products made in Turkey can enter the European market duty-free. This is an advantage that Chinese companies could use to circumvent European regulations.   The EU has already put in place tools to protect itself, but will they be enough? Find the full analysis here: https://lnkd.in/gBt9xsxk Common Ground of Europe is a platform that gives you the opportunity to express your opinion on the current economic, social and political challenges in Europe – so that together we can create a real common ground for Europe.

NEW: The PRC eased cross-strait trade and travel restrictions after hosting a Kuomintang delegation. The PRC ended the trade bans after hosting the KMT delegation as a form of economic coercion that aims to reduce domestic support for the Democratic Progressive Party in Taiwan. Read the full China-Taiwan Weekly Update: https://lnkd.in/e5ZXZ8WV Other Key Takeaways: President-elect Lai Ching-te announced his national security cabinet picks on April 25. The reshuffling of cabinet posts is telling of Lai’s intent to stay the course in cross-strait policy. The CCP signaled during US Secretary of State Antony Blinken’s visit to the PRC the potential for cooperation in US-PRC relations while asserting that US actions—including economic measures against the PRC and support for Taiwan–risk competition and instability. The Chinese Coast Guard and Chinese Maritime Militia failed to block a Philippine Coast Guard resupply mission near Scarborough Shoal on April 30. This is the latest PRC effort to enforce the CCP’s territorial claims in the South China Sea. CCP General Secretary Xi Jinping will visit France, Serbia, and Hungary from May 5 to 10 as part of a charm offensive to build ties with the European states and block the formation of a stricter EU policy on China. The PRC hosted “reconciliation” talks between Fatah and Hamas in Beijing and endorsed the strengthening of the Palestinian Authority. Hosting the intra-Palestinian talks is a relatively low-cost, low-risk way for the PRC to bolster its diplomatic reputation and signal its intent to play an active diplomatic role in the Middle East.

New Eight-Person US Group Helps Fight China Economic ‘Coercion’By Peter Martin and James Mayger(Bloomberg) -- When South Korea decided to host a US anti-ballistic missile system, the lucrative flow of tourists from neighboring China suddenly dried up. When Australia accused Beijing of meddling in its domestic politics and demanded answers over the origins of Covid-19, China stopped buying exports like coal, wine and beef.It wasn’t until Beijing tried to punish Lithuania for opening a liaison office with Taiwan in 2021 that Washington intervened.A key outcome from that episode was the creation of a team inside the US State Department to help when Beijing responds to political disputes with economic and trade weapons — what the US and its allies call economic coercion. Demand for that help has been strong, according to the US official in charge of the program. “Countries are coming in, and many are coming in saying ‘We want the Lithuania treatment,’” Jose Fernandez, under secretary for economic growth and the environment, said in an interview, referring to a package of trade finance, procurement deals and market access Washington offered the Baltic nation.Since then, about a dozen other nations in Asia, Africa, Latin America and Europe have sought guidance on how to prepare for or mitigate economic pressure from China, according to people familiar with the program, who asked not to be named discussing private information.Full story here: https://lnkd.in/e9D_HxVe

US should not undermine normal trade relations between China, Russia — Chinese embassy The allegations of the US authorities about China's support of the Russian defense industrial complex through trade have no basis, Liu Pengyu added WASHINGTON DC, July 25/ Washington should not undermine normal economic and trade relations between Beijing and Moscow, a spokesman for the Chinese embassy in the US told TASS. "China's right to engage in normal economic and trade exchanges with all countries, including Russia, on the basis of equality and mutual benefit, should not be undermined," Liu Pengyu said, commenting on the words of a US diplomat who said that Beijing was allegedly supporting Moscow's special military operation in Ukraine by providing assistance to the Russian defense industry, which, according to the US, had a destabilizing effect. The allegations of the US authorities about China's support of the Russian defense industrial complex through trade have no basis, a spokesman added. "The US is rolling out aid act for Ukraine while making groundless accusations against the normal economic and trade exchanges between China and Russia. This approach is hypocritical and irresponsible, which China firmly opposes," Liu Pengyu said. The spokesman pointed out that China has always taken "an objective and fair stance, actively promoting peace talks and facilitating a political resolution." "We don’t seek selfish gains by fueling the tensions, nor do we provide weaponry to either side," he said. #business #finance #financialservices

#RussianEconomy Two and a half years into Russia-Ukraine war, Russia’s economy is holding up well. It is hard to tell which European firms are simply adjusting well to the new restrictions and which are circumventing sanctions. But as it happens the biggest boosts in trade flowing through third countries have been among products that are now heavily restricted.