On Dec. 2, the State Department issued new restrictions on travel visas for members of the Chinese Communist Party (CCP) and their families. All CCP members will be restricted to single-entry visas, which are valid for a month. By contrast, other Chinese citizens may obtain multiple-entry visas that can last up to 10 years.
Even before the announcement, U.S. border officials had reportedly begun questioning Chinese airline crews and sailors—sometimes for hours—about whether or not they had CCP membership. Asked about the investigations, Chinese Foreign Ministry spokesperson Hua Chunying said, “We urge the U.S. side to immediately stop the erroneous acts, stop stoking ideological antagonism, and stop unjustified crack-down on China. If the U.S. side insists on escalating its provocative actions, China will certainly take countermeasures.”
The latest visa restrictions follow a pattern of increased U.S. scrutiny of Chinese government officials traveling to the United States. Earlier this year, the U.S. reduced the number of visas for Chinese state media employees, placed two sets of visa restrictions and sanctions on CCP officials responsible for asserting additional control of Hong Kong and another group of restrictions on those overseeing actions against the Uighurs in Xinjiang, canceled visas for certain Chinese graduate students in September, and restricted visas for some Chinese tech companies. Party membership is common among top technology executives in China, with well-known party members like Alibaba CEO Jack Ma typically making multiple trips to the United States each year. The restrictions on CCP members further cement the Trump administration’s policy of decoupling from China, as does news of Treasury sanctions against the China National Electronics Import & Export Corporation (CEIEC) for “supporting the illegitimate Maduro regime’s efforts to undermine democracy in Venezuela.”
The new visa restrictions also reiterate the Trump administration’s recent rhetorical distinction between the CCP and the Chinese people. Deputy National Security Adviser Matt Pottinger kicked off the strategy in his speech (delivered in Mandarin) that honored the 101st anniversary of the May Fourth Movement. Since then, members of the administration have repeatedly hinted at—or perhaps encouraged—popular resistance within China to party control. For instance, in an address at the Nixon Library in July, Secretary Mike Pompeo urged: “We must … engage and empower the Chinese people—a dynamic, freedom-loving people who are completely distinct from the Chinese Communist Party.”
There are 92 million members of the CCP; counting their family members, perhaps 200 million individuals may be affected. Critics have called the new regulations “an escalation of political suppression.” Though no legal challenges have yet been filed, the government may have to defend the regulations in court. The Trump administration’s recent tightening of visa restrictions on foreign workers was struck down in the U.S. District Court for the District of Northern California on Dec. 1.
Chinese Regulators Focus on Defaults
On Nov. 21, Vice Premier Liu He emphasized a “zero tolerance” policy for misbehavior regarding fraud and debt evasion while chairing a meeting of the Financial Stability and Development Committee. On Nov. 30, Guo Shuqing, secretary of the Party Committee on the Central Bank and chairman of the China Banking and Insurance Regulatory Commission, warned that the real estate sector represents one of China’s most significant financial risks.
The years 2018 and 2019 saw a record number of bond defaults by Chinese companies—totaling 141 billion yuan and 122 billion yuan, respectively. This year, high-profile defaults by Chinese state-owned enterprises have demonstrated that the risk is ongoing—even in government-backed firms. Yongcheng Coal & Electricity defaulted on a 1 billion yuan bond in November. Tsinghua Unigroup, a chipmaker, and Huachen Automotive, followed soon thereafter, defaulting on similarly sized debt.
Corporate debt has been a rising issue in China since the Hu government’s big-spending response to the 2008 financial crisis. Now there are worries that local governments, too, will begin to default on their debts. By one estimate, the provincial government of Guizhou is in the deepest debt due to its heavy reliance on local government financing vehicles, a bond-issuing spending mechanism used across China. Guizhou, one of the poorest provinces in China, spent heavily to eliminate “extreme poverty.” Guizhou was the last province to officially be certified as poverty free by the central government’s standard.
Shadow banking—a $9 trillion industry of off-the-books lending in China—continues to pose a challenge to regulators. The Chinese government is strengthening financial reporting requirements to avoid credit risk crises like the one that led to the Chinese government’s takeover of Baoshang Bank in 2018. And the National Association of Financial Market Institutional Investors has put a number of banks under investigation amid worries of widespread defaults.
Chinese debt has been referred to as a “gray rhino”—an obvious but ignored risk. Fears are not limited to the financial sector. Henan province, the home of Yongcheng Coal, issued a statement in November describing a “severe situation” in its finances. The province, which is involved in the control of the firm, may not be able to stabilize Yongcheng’s parent company, Henan Energy. Henan Energy employs 180,000 workers, mostly in Henan province.
U.S. Declines to Enforce TikTok Sale Deadline
The deadline for the sale of TikTok to an American company passed on Dec. 4. The Trump administration neither extended the deadline nor chose to enforce the requirement of the sale. Discussions between the Committee on Foreign Investment in the United States (CFIUS) and ByteDance, TikTok’s parent company, over a proposed partial sale to Oracle and Walmart will continue while CFIUS has issued a de facto extension.
Legal challenges to the administration’s August ban on TikTok are ongoing: ByteDance filed one case in Washington, D.C.; influencers on TikTok have filed other challenges in Pennsylvania. Both federal district courts blocked the Commerce Department’s ban. The government has appealed in both cases.
Oral arguments for the TikTok case are scheduled for Dec. 14 at the U.S. Court of Appeals for the D.C. Circuit. The U.S. Court of Appeals for the Third Circuit is not likely to hear the influencers’ case this year as proceedings are expected to go past January.
China’s Moonshot Returns to Earth
China has landed an unmanned probe on the moon. The spacecraft, known as Chang’e-5, is now on its way back to Earth. The technological triumph comes after two failed missions—one Israeli, the other Indian—to reach the moon last year.
China has been working toward supremacy in space for nearly 20 years. In 2020, China surpassed the United States, its chief competitor in space, in the number of rockets launched. It also made progress toward completing the BeiDou navigation system, China’s answer to the U.S. GPS system. In the private sector, Chinese space startups have proliferated in recent years.
Beijing’s plans to put a fully operational space station in orbit, which could be ready by 2022. The U.S.-led international space station is likely to retire between 2024 and 2028. China also became the owner of the world’s only operational giant single-dish space telescope after Puerto Rico’s Arecibo Observatory platform collapsed on Dec. 1.
China Begins RCEP Implementation
After signing the Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement by population, China is now embarking on implementation of the necessary domestic reforms to comply with the terms of the trade deal. On Dec. 1, Chinese Premier Li Keqiang chaired an executive meeting of the State Council to discuss greater openness in trade and investment.
At the meeting, Li stated, “China treats the signing of RCEP as a major step to further expand opening-up.” The quote, which echoes decades of CCP rhetoric following Deng Xiaoping’s launch of “reform and opening-up,” reflects the transformation of China’s economic policy from export-led growth to a more “balanced” model emphasizing domestic consumption and regional independence under Chinese leadership.
WeChat Blocks Australian Prime Minister Amid China-Australia Diplomatic Tensions
The Chinese messaging app WeChat has blocked Australian Prime Minister Scott Morrison from using the app.
The prime minister had used the app to criticize a doctored photo—uploaded to WeChat by a spokesman of the Chinese Foreign Ministry—of an Australian soldier violently threatening the life of an Afghan child. The removal of the critical post was accompanied by a note that marked the content as “distorting historical events and confusing the public.”
Sino-Australian relations have been in a downward spiral all year, due to trade spats, allegations of influence-peddling and mutual raids. But they reached a fever pitch in recent weeks, with China’s retaliatory trade actions following Australian calls for an independent investigation into the origins of the coronavirus pandemic. Australia is now warning of legal action against what it perceives as breaches of a Sino-Australian trade deal and World Trade Organization rules.
China Proceeds With Rollout of State-Backed Digital Currency
China launched a second citywide trial of its digital yuan currency in Suzhou, a city near Shanghai. To drum up local interest in the digital currency, the Suzhou government is distributing $3 million of the digital renminbi in a lottery for residents.
China leads the world in the development of a central bank-backed digital currency, which differs from decentralized or private cryptocurrencies like Bitcoin or Facebook’s proposed Libra. On Dec. 5, Chinese retailer JD.com became the first e-commerce platform to accept the digital currency.
However, other nations—including Japan, Sweden, the U.K., Canada, Switzerland and the Bahamas—have begun exploring the possibility of launching their own state-backed digital currencies “to dampen the domineering effect of the U.S. dollar on global trade.”
In the latest Trump administration official railing against Beijing, Director of National Intelligence John Ratcliffe calls China “National Security Threat No. 1” in a Wall Street Journal op-ed, describing a pattern of theft and oppression by the CCP.
The U.S.-China Economic and Security Review Commission’s annual report urges greater domestic investment in key technologies and a revitalization of U.S. influence in the global fora that set standards for hardware and software. China has been pushing for global adoption of its own standards, which would pave the way for greater share in foreign markets.
Daniel Rechtschaffen, a government relations manager at the American Chamber of Commerce in Shanghai, writes on the structural issues with Chinese intellectual property (IP) law for The Diplomat. In the China Law Blog, Matthew Dresden describes ownership options for IP in China.
In Foreign Policy, Salvatore Balbones, an adjunct scholar at the Center for Independent Studies in Sydney, warns the Biden administration of the problems posed by Chinese technology.
Steven Feldstein weighs the potential merits of a T-10 alliance to counter China’s digital rise for the Council on Foreign Relations.
Elizabeth Economy, a senior fellow at Stanford University’s Hoover Institution and the senior fellow for China studies at the Council on Foreign Relations, publishes an in-depth look at the development and future of the “China Model” for the Hoover Institution, which she characterizes as “Unexceptional Exceptionalism.”
Gregory B. Poling, a senior fellow at the Center for Strategic and International Studies (CSIS), and Michael J. Green, a senior vice president at CSIS, discuss the future of the U.S.-Philippines relationship and its implications for relations with China.
Robert Williams, the executive director of the Paul Tsai China Center and a lecturer at Yale Law School, writes for the Brookings Institution on how federal privacy legislation would help assuage cybersecurity concerns surrounding Chinese companies. The Brookings Institution will host an event on Dec.17 on charting the future of U.S. leadership and engagement in Asia.