China Macro Reporter

<tr><td class="nl-post"><p>Greetings!</p><p>Rather than cave to President Trump, Xi Jinping is renewing the call for Chinese ‘self-reliance.’</p><p>That term has a long and evolving history in the Chinese Communist Party.</p><p>So, just what Xi means is important to understanding his position.</p><p>Part of China&rsquo;s efforts toward &lsquo;self-reliance&rsquo; includes Huawei.</p><p>So President Trump&rsquo;s blacklisting Huawei could backfire. Instead of forcing concession from Xi, Xi might double-down on Chinese self-reliance.</p><p>And, over time, China may indeed become self-reliant &ndash; and not just in technology.</p><p>To highlight the issue, I have made &lsquo;self-reliance&rsquo; red and underlined throughout.</p><p>Four essays today to cover these topics:</p><ol><span style="display:block; margin-left:2em;"><li>Xi Jinping&rsquo;s Trade Conundrum: Why the Chinese Leader Isn&rsquo;t About to Back Down</li><li>Why Blacklisting Huawei Could Backfire</li><li>BACKGROUNDER | Huawei: China&rsquo;s Controversial Tech Giant</li><li>Mao Redux: The Enduring Relevance of Self-reliance in China</li></span></ol><p>Let me know what you think!</p></td></tr>

1. Xi Jinping’s Trade Conundrum: Why the Chinese Leader Isn’t About to Back Down

<tr><td class="bg-holder"><img width="100%" src="" alt="CHINADebate"></td></tr><tr><td class="nl-post"><p class="caption">Foreign Affairs</p><p class="excerpt">For all the talk of <u><span class="u-red">self-reliance</span></u>, China remains dangerously dependent on American technology and trade.’</p><p>‘<strong>A month after</strong> American and Chinese negotiators failed to seal what was supposed to be a “slam dunk” of a trade deal, observers on both sides of the Pacific are still scratching their heads over what went wrong,’ writes <a href="" target="_blank">Chris Johnson</a> of the Center for Strategic and International Studies and is a former senior China analyst at the CIA in <a href="" target="_blank">‘Xi Jinping’s Trade Conundrum’</a> in <em>Foreign Affairs</em>.’ </p><ul><li>‘<strong>But in Washington and Beijing</strong>, leaders already appear to be gearing up for a longer-term struggle, making a <a href=""  target="_blank">true deal</a>—one that resets rapidly deteriorating bilateral ties—increasingly elusive.’</li></ul><p>‘<strong>In the U.S.</strong> news media, most <a href="">commentators</a> have blamed China for the recent effort’s collapse.’</p><ul><li>‘<strong>At the last minute</strong>, this <a href="" target="_blank"> analysis</a> suggests, China reneged on terms that U.S. Trade Representative Robert Lighthizer and his Chinese counterpart, Vice Premier Liu He, had painstakingly hammered out over 11 rounds of tough, often heated negotiations.’</li><li>‘<strong>Among the many</strong> competing <a href="" target="_blank">hypotheses</a> for China’s seemingly abrupt about-face, one has <a href="">gained particular credence</a>, and that is that unidentified “hawks” or “vested interests” in the Politburo of the Chinese Communist Party (CCP) rejected the concessions that Liu—and by extension his boss, ‘Chinese President Xi Jinping—made in the negotiations.’</li><li><strong>‘But this notion is simply absurd.’</strong></li></ul><p>‘<strong>In his nearly seven years in office</strong>, Xi has relentlessly<a href="" target="_blank"> centralized</a> decision-making authority in his hands.'</p><ul><li>‘<strong>He has manipulated</strong> the military, the security services, and the CCP’s propaganda machine to silence his opponents and effectively coup-proof his rule.’</li><li>‘<strong>Doing so has allowed</strong> him to pursue an assertive style of Chinese statecraft, one less awestruck by American power than in the past.’</li></ul><p>‘<strong>Against this backdrop</strong>, the idea that hard-line underlings could have pulled Xi’s policy toward the United States off course isn’t just wrong-headed—it’s dangerous for U.S. policy.’</p><ul><li>‘<strong>Those who believe</strong> that Xi can be bullied by hard-liners must also imagine that he is on the defensive, if not on the ropes, at home and as such is unable to return to the original terms of the trade deal.’ </li></ul><p><strong>‘Xi very likely</strong> orchestrated the turnabout himself.’</p><ul><li><strong>‘Such a move</strong> would make sense, given that within the CCP’s unique ecosystem, leaders generally gain more by outflanking hard-liners than by siding with reform-minded technocrats.’</li><li><strong>‘In fact</strong>, Xi has made seizing the nationalist high ground—in order to deny it to his opponents—a hallmark of his rule.’</li><li><strong>‘Xi likely shifted</strong> China’s negotiating posture in order to stall the talks, which gives him leverage even while he retains the flexibility to return to the negotiating table whenever he believes the conditions are right.’</li><li><strong>‘By unleashing its own hawks</strong>, the Trump administration has actually made such a pivot much more complicated.’</li></ul><p><strong>‘Understanding Xi as fully in command</strong>, rather than as having been outplayed by hard-liners within the Politburo, sheds useful light not only on the collapse of the trade talks but also on the direction of China’s domestic and foreign policy. Xi has two competing—and possibly contradictory—impulses when it comes to managing the trade dispute with Washington.’</p><ul><li><strong>‘On the one hand</strong>, he wants to show that China is no longer the weak and backward country that suffered a “century of humiliation” at the hands of Western and Japanese imperialists. Rather, it has become a strong, confident, and modern power.’</li><li><strong>‘On the other hand</strong>, Xi is fully aware that China is struggling to manage its transition from an old, dirty, and industry-heavy economy to a twenty-first-century knowledge economy.’</li><li><strong>‘Such a transition</strong> will inevitably cause substantial economic dislocations, which risk disrupting the country’s seemingly smooth and inexorable rise.’</li><li><strong>‘But any prolonged</strong> setback runs the risk of increasing Chinese dependency on the United States at a time when Washington’s trade policies are particularly unfriendly.’</li></ul><p><strong>‘In depicting China</strong> as a great power on the world stage, Xi seeks to reframe the larger narrative of the CCP and its leadership of the country.’</p><ul><li><strong>‘The CCP already bases</strong> its legitimacy on performance, and in particular on its capacity to break through the “middle-income trap,” the plateau where economic theory holds that a country’s development can get stuck for structural reasons.’</li><li><strong>‘Xi’s claim</strong> that he is leading the country into a new era places additional pressure on the party to deliver real improvements in living conditions—and fast.’</li><li><strong>‘But the United States</strong> dominates a number of industries that are essential to building a modern high-tech economy, most notably the semiconductor industry, and as a result China cannot completely control its own destiny.’</li><li><strong>‘The Trump administration</strong> erased any doubts on that score when it issued Commerce Department denial orders against China’s two leading telecommunications companies, ZTE in April 2018 and Huawei in May. Blocking the companies’ access to critical U.S. components threatens to hobble China in its bid to develop 5G and other technologies that will prove foundational in the future.’</li><li><strong>‘And therein lies</strong> the central contradiction of Xi’s new narrative. For all the talk of <u><span class="u-red">self-reliance</span></u>, China remains dangerously dependent on American technology and trade to fuel its continued growth and prosperity.’</li></ul><p><strong>‘But Xi</strong> is far too wily to risk relying on an unpredictable U.S. president.’</p><ul><li><strong>‘By stressing</strong> <u><span class="u-red">self-reliance</span></u> and the indigenous pursuit of technological innovation, he has prepared the ground for a sharp inward turn should one become necessary.’</li><li><strong>‘To this end</strong>, he has subtly reframed long-held principles of the CCP to suggest that China now shapes its external environment through its success and growing power.’</li><li><strong>'Whereas in the past</strong> the party cast the country as the passive beneficiary of good fortune on its periphery, today Xi presents China’s “economic miracle”—credited solely to the party’s vision and the people’s hard work and sacrifice—as the driving force behind a stable and secure international order.’</li></ul><p><strong>‘In the end</strong>, Xi’s decision to backpedal on the draft trade agreement can be explained by the contradiction at the heart of the new narrative he is spinning for China.’</p><ul><li><strong>‘The path to</strong> economic independence—and to the prosperous new era Xi has promised—runs through the United States and its high-tech industry.’</li><li><strong>‘As a result</strong>, Xi must steer a difficult political course, one best navigated from the nationalist high ground.’</li><li><strong>‘But instead of giving</strong> him a chance to climb down, the Trump administration risks forcing him to dig in.’</li></ul></td></tr>

2. Why Blacklisting Huawei Could Backfire

<tr><td class="bg-holder"><a href="" target="_blank"><img width="100%" src="" alt="CHINADebate"></a></td></tr><tr><td class="nl-post"><p class="caption">Foreign Affairs</p><p class="excerpt">‘In China, the concept of “self-reliance,” or ziligengsheng, traces its roots back to the civil war, when Mao Zedong’s communist guerrillas found themselves isolated and facing annihilation at the hands of the U.S.-backed nationalist forces.’</p><p><strong>‘Last spring</strong>, the U.S. Department of Commerce added the Chinese telecommunications company ZTE to a trade blacklist, effectively severing ZTE from its vital U.S. suppliers,’ writes <a href="" target="_blank">Lorand Laskai</a> in <a href="" target="_blank">‘Why Blacklisting Huawei Could Backfire’</a> in <em>Foreign Affairs</em>.’</p><ul><li><strong>‘Chinese President Xi Jinping</strong> told an audience at a tech company that the Chinese people must “cast aside the illusion and rely on ourselves.”’</li><li>‘“<strong>The illusion</strong>” was the idea that China can prosper even as it relies on foreign technology.’</li></ul><p><strong>‘The Trump administration</strong> seems determined to prove Xi right.’</p><ul><li><strong>‘Last month</strong>, it blacklisted the telecommunications giant Huawei, the third major Chinese company to be added to the Commerce Department’s blandly named Entity List within the last year.’</li><li><strong>‘The Trump</strong> administration is also considering <a href="">blacklisting</a> several of China’s largest artificial intelligence companies.’</li></ul><p><strong>‘The Trump</strong> administration is betting that banning Chinese tech companies will bring Beijing to the negotiating table with the aim of negotiating <a href="" target="_blank">“structural changes”</a> to the Chinese economy.’</p><ul><li><strong>‘And barring that</strong>, it is hoping to deal China a blow in the race to harness next-generation technologies, such as AI and 5G.’</li><li><strong>‘But within China</strong>, the administration’s moves have created a powerful new consensus in support of “<u><span class="u-red">self-reliance</span></u>” and “indigenous innovation,” two mantras of the Chinese Communist Party that the country’s tech industry has reluctantly taken up.’</li><li><strong>‘Washington has underestimated</strong> China’s ability to “tighten its belt,” as Xi put it after the ZTE blacklisting, and to develop replacements for foreign technology.’</li><li><strong>‘The Trump administration</strong> may well be paving the way toward a more technologically independent, and possibly more powerful, China.’</li></ul><p><strong>‘Blacklisting Huawei</strong>, however, has turbocharged the indigenous innovation effort.’</p><ul><li><strong>‘As a result of the blacklisting</strong>, the company plans to launch a replacement for Google’s Android operating system later this year.’</li><li><strong>‘It is also working</strong> to replace a myriad of U.S. components and software to which it will soon lose access.’</li><li><strong>‘Last week</strong>, <em>Bloomberg </em><a href="" target="_blank">reported</a> that Huawei has up to 10,000 developers working around the clock in three cities to “eliminate the need for American software and circuitry.”’</li></ul><p><strong>‘China’s technology industry</strong> illustrates the problems markets pose to Beijing’s <u><span class="u-red">self-reliance</span></u> push.’</p><ul><li><strong>‘The wide availability</strong> of superior foreign software and hardware has hampered progress.’</li><li><strong>‘Moreover</strong>, China’s tech giants have long been noncommittal toward Beijing’s <span class="u-red">self-reliance</span> drive, choosing to invest in lucrative consumer-facing applications rather than the “core technologies” that the state values.’</li><li><strong>‘The country’s three largest tech companies</strong>, Baidu, Alibaba, and Tencent, all owe their large valuations to consumer products built on Western technologies.’</li><li><strong>‘None other than Huawei</strong> founder Ren Zhengfei has <a href="" target="_blank">repeatedly bashed</a> the idea of indigenous innovation and extolled the advantages of global supply chains. “The idea that one needs to do everything themselves is a mentality only for peasants,” Ren said in an interview last year.’</li></ul><p><strong>‘But U.S. action against Chinese companies</strong> has begun to change their calculus toward indigenous development.’</p><ul><li><strong>‘Reeling from U.S. sanctions</strong>, Huawei executives <a href="" target="_blank">traveled</a> to Peking University last week to launch an R & D partnership with the university to bolster Huawei’s capacity for “indigenous innovation.”’</li><li><strong>‘By using the official slogan</strong>, Huawei’s bosses seemed to be offering a <em>mea culpa</em>for their past resistance to <u><span class="u-red">self-reliance</span></u>.’</li></ul><p><strong>‘Replacing the many U.S. suppliers</strong> on which Chinese companies rely will be a tall order, and at least in the short term, Chinese suppliers will be <a href="" target="_blank">unable</a>  to fully meet the needs of companies such as Huawei.’</p><ul><li><strong>‘Advanced processors</strong> and chipsets that power the cutting-edge computation involved in machine learning, cloud computing, and 5G networks are almost exclusively developed by a handful of Western companies.’</li><li><strong>‘Although some Chinese companies</strong>, such as Huawei’s chip unit HiSilicon, can build their own chips for some applications, they still rely on U.S. software and intellectual property to design the chips and international foundries, such as Taiwan’s TSMC, to manufacture them.’</li></ul><p><strong>‘Nevertheless</strong>, China does have several factors working in its favor.’</p><ul><li><strong>‘For starters</strong>, it doesn’t need to develop everything itself. Chinese companies have long been <a href="" target="_blank">comfortable</a> acquiring technology abroad through partnerships, mergers and acquisitions, or outright intellectual property theft.’</li><li><strong>‘U.S. export controls</strong> wouldn’t stop most of these, as they restrict only the export of U.S. technology or foreign products that contain significant U.S.-origin software or components.’</li><li><strong>‘Technological partnerships</strong> and academic<strong></strong>exchanges between China and the European Union played a <a href="" target="_blank">critical</a> role in China’s development of the BeiDou constellation.’</li><li><strong>‘And Chinese state-backed funds</strong>, often using offshore shell companies, have proved adept at <a href="" target="_blank">evading scrutiny</a> from U.S. sanction enforcers.’</li><li><strong>‘As the U.S. technological embargo expands</strong>, so will the opportunities to poke holes in it.’ </li></ul><p><strong>‘Another advantage</strong> is China’s enormous domestic market.’</p><ul><li><strong>‘Few companies</strong> outside the United States are able to turn down opportunities to sell in China, and even fewer governments are willing to stomach the economic pain of turning away Chinese demand at Washington’s say-so.’</li><li><strong>‘The Trump administration’s</strong> unsuccessful campaign to get Europe to ban Huawei from building its 5G network should have been a warning sign of the limited tolerance of U.S. allies for Washington’s brinkmanship.’</li><li><strong>‘Instead,</strong> the administration is doubling down on a strategy that anticipates allies toeing the U.S. line.’</li></ul><p><strong>‘It didn’t</strong> have to be this way.’</p><ul><li><strong>‘The United States</strong> could have maintained the rift between government and industry in China if it had ensured China’s continued dependence on U.S. technology.’</li><li><strong>‘Instead,</strong> the Trump administration’s actions against ZTE and Huawei have turbocharged China’s <u><span class="u-red">self-reliance</span></u> drive, aligning the interests of government and industry.’</li><li><strong>‘Although in the short term</strong> the pain imposed on China’s tech industry by the blacklisting might appear to vindicate the administration’s move, over the long term its actions will pave the way to a more technologically formidable China.’</li></ul></td></tr>

3. BACKGROUNDER | Huawei: China’s Controversial Tech Giant

<tr><td class="bg-holder"><img width="100%" src="" alt="CHINADebate"></td></tr><tr><td class="nl-post"><p class="caption">CFR</p><p class="excerpt">‘The Chinese telecommunications company faces accusations from President Trump and other leaders that Beijing could use it for cyber espionage. The outcome of the struggle could shape the world’s tech and 5G landscape for years to come’.</p><p><strong>‘The Chinese telecommunications</strong> giant Huawei is central to the construction of new fifth-generation (5G) mobile networks around the world,’ write <em></em><a href="" target="_blank">Lindsay Maizland</a><em></em> and <em></em><a href="" target="_blank">Andrew Chatzky </a><a href="" target="_blank">‘Huawei: China’s Controversial Tech Giant’</a> in a <em>Foreign Affairs </em>Backgrounder.’</p><ul><li><strong>‘Yet its global influence</strong> has led the United States to raise concerns about whether the Chinese government could use the company to spy, or to sabotage critical infrastructure.’</li><li><strong>‘Washington has led a crackdown</strong> on Huawei by enforcing nationwide bans on the company’s equipment and encouraging its allies to do the same.’</li></ul><p><strong>‘Some experts warn</strong> that tensions between Washington and Beijing over technology could lead to a “<a href="" target="_blank">digital iron curtain,”</a>  which would result in governments having to decide between doing business with the United States or China.’</p><h5>What is Huawei?</h5><p><strong>‘It is the world’s largest seller of</strong> telecommunications equipment, such as new 5G network infrastructure, and the second-largest smartphone maker.’</p><ul><li><strong>‘Based in Shenzhen</strong>, China, Huawei sells its products domestically and internationally. In the United States, it sells few phones but helps provide connectivity in some rural areas.’</li><li><strong>‘Ren Zhengfei</strong>, the company’s <a href="" target="_blank">billionaire CEO</a>, founded Huawei in 1987.’</li><li><strong>‘With more than 180,000 employees</strong>, according to its website, Huawei claims to be a private company fully owned by its employees, though its precise <a href="" target="_blank">ownership structure</a> is unknown.’</li></ul><img width="100%" src="" alt="CHINADebate"><h5>Why is it so controversial?</h5><p><strong>‘In recent years</strong>, the United States and several other countries have asserted that the company threatens their national security, saying it has violated international sanctions and stolen intellectual property, and that it could commit cyber espionage.’</p><p><span class="h5p">‘Cyber espionage. </span>The main concern, according to U.S. intelligence agencies, is that the Chinese government could use Huawei to spy.’</p><ul><li><strong>‘Officials</strong>, primarily in the United States but also in <a href="" target="_blank">Australia</a> and several other countries, point to vague Chinese intelligence laws that could be used to force Huawei to hand over data to the Chinese government. (The United States has not publicly provided evidence that this has happened.)’</li><li><strong>‘There are also concerns</strong> that Huawei’s 5G infrastructure could contain backdoors giving the Chinese government access to its inner workings and allowing Beijing to attack communications networks and public utilities.’</li></ul><p>‘A <a href="" target="_blank">2012 U.S. House Permanent Select Committee on Intelligence report [PDF]</a>  concluded that using equipment made by Huawei and ZTE, another Chinese telecommunications company, could “undermine core U.S. national security interests.”’</p><ul><li><strong>‘In 2018</strong>, six U.S. intelligence chiefs, including the directors of the CIA and FBI, cautioned Americans against using Huawei products, warning that the company could conduct “<a href="" target="_blank">undetected espionage</a>.”’</li></ul><p><strong>‘At the heart of Washington’s concerns</strong> is 5G, the next generation of cellular networks, which will provide faster download speeds for smartphones, connect devices in smart cities, and support autonomous vehicles and robots.’</p><ul><li>‘“<strong>5G is a different type of risk</strong> versus 4G or 3G. It’s much harder to separate the core from the periphery,” says CFR’s Adam Segal. “Once you have those risks, you have to trust the company much more. But it is difficult to trust Huawei, given the relationship between companies and the Communist Party.”’</li></ul><p><span class="h5p">Intellectual property theft. </span> U.S. companies and global telecom firms have for years accused Huawei of <a href="" target="_blank">stealing trade secrets</a>, starting with Cisco’s 2003 lawsuit alleging that its source code appeared in Huawei products. (The suit was later settled.)’</p><ul><li><strong>‘In 2017</strong>, a U.S. jury found Huawei guilty of stealing intellectual property from T-Mobile, and the U.S. Justice Department claimed in a <a href="" target="_blank">2019 indictment[PDF]</a> that Huawei repeatedly tried to steal design information for a T-Mobile robot.’ </li></ul><p><span class="h5p">‘Trade violations.</span> The United States claims that Huawei has long violated sanctions on Iran.’</p><ul><li><a href="" target="_blank">‘A federal indictment</a> unsealed in January 2019 against Meng Wanzhou, Huawei’s chief financial officer and Ren’s daughter, said that Huawei defrauded banks in order to do business with Iran and obstructed justice in the process by destroying evidence.’</li><li><strong>‘Meng, who has denied the accusations</strong>, was detained in Canada in December 2018 at the request of the United States, which is seeking her extradition.’</li></ul><h5>How much sway does Beijing have over tech companies?</h5><p><strong>‘The government </strong>has considerable sway over all Chinese private companies through heavy regulation, including the requirement that they establish Chinese Communist Party (CCP) branches within them, and state-backed investment.’</p><ul><li><strong>‘Executives of many</strong> of the biggest companies are party members, including Jack Ma of Alibaba and Huawei’s founder, Ren, who served as an engineer in the People’s Liberation Army during the Cultural Revolution.’</li></ul><p><strong>‘Under President Xi Jinping</strong>, the lines between the public and the private have become even more blurred.’</p><ul><li><strong>‘Experts have observed</strong> that the CCP is working to boost its <a href="" target="_blank">influence over private industry</a>, especially tech companies.’</li><li><strong>‘In recent years</strong>, foreign news organizations have reported that the government may start pressuring tech companies to <a href="" target="_blank">offer the party direct ownership stakes</a> and give party members even greater roles in management, though there is no evidence that this has happened at Huawei.’</li></ul><p><strong>‘Some experts and U.S</strong>. officials also point to vague Chinese laws that could be used to force Huawei to help the government with intelligence gathering.’</p><ul><li><strong>‘For example</strong>, the <a href="" target="_blank">National Security Law</a>, enacted in 2015, states that citizens and enterprises have the “responsibility and obligation to maintain national security.”’</li><li><a href="" target="_blank" rel="noopener">2017 National Intelligence Law[PDF]</a> declared that Chinese companies must “support, assist, and cooperate with” China’s intelligence-gathering authorities.’</li></ul><p><strong>‘At the same time</strong>, Huawei has distanced itself from the CCP, repeatedly asserting that its equipment has never been used, and will never be used, to spy.’</p><ul><li><strong>‘In January 2019</strong>, Ren made a <a href="" target="_blank" rel="noopener">rare media appearance</a>, saying he “would never harm the interest of my customers” and that Huawei would not answer government requests for intelligence.’</li><li><strong>‘In May 2019</strong>, Huawei commissioned a <a href="" target="_blank">thirty-six-page legal report</a> from a Chinese law firm supporting its argument that it cannot be forced to spy, but <a href="" target="_blank">other lawyers</a> in China and around the world said the law has never been tested.’</li><li><strong>‘The Chinese government</strong> has also gone to bat for Huawei, saying it would “<a href="" target="_blank" rel="noopener">take all necessary measures to safeguard</a>” Chinese companies and pressuring Canada to release Meng from house arrest.’  </li></ul><h5>How did Huawei become so dominant?</h5><p><strong>‘Huawei became</strong> the world’s largest telecommunications company over three decades, reporting $100 billion in revenue in 2018, a 20 percent jump from the previous year.’</p><ul><li><strong>‘This success has</strong> helped drive suspicion that the Chinese government has played a role in the company in recent years.’</li></ul><img width="100%" src="" alt="CHINADebate"><p><strong>‘In 1996</strong>, both the government and military began treating Huawei as an official “national champion,” a status reserved for firms that bolster China’s strategic aims.’</p><ul><li><strong>‘The move highlighted</strong> a shift in official policy. From then on, Beijing explicitly supported domestic telecom companies—and Huawei even more than others[PDF]—to prevent foreign domination of the industry.’</li><li><strong>‘The Chinese government ensured</strong> Huawei had easy access to financing and high levels of government subsidies—$222 million in government grantsin 2018 alone.’</li></ul><p><strong>‘This cushion</strong> has allowed Huawei to price its network equipment below other companies’ rates.’</p><ul><li><strong>‘In the Netherlands</strong>, Huawei underbid Swedish firm Ericsson by 60 percent to provide network equipment for the national 5G network.’</li><li><strong>‘Experts said that Huawei’s</strong> prices would not have even covered the cost of producing their parts without subsidies.’</li><li><strong>‘Chinese state banks</strong> also provide countries low-interest loans to use Huawei’s equipment.’</li></ul><p><strong>‘Huawei says</strong> its low prices are the result of technological expertise—a claim with some merit, according to industry experts.’</p><ul><li><strong>‘Huawei’s annual research</strong> and development (R&D) budget is among the world’s largest, and Ren says his firm spends more on it than most publicly listed firms can.’</li><li><strong>‘At <a href="">$15.3 billion in 2018</a></strong>, Huawei’s R&D expenditures rank alongside those of Alphabet (Google’s parent company) and Amazon.’</li></ul><h5>How has the United States banned Huawei?</h5><p><strong>‘The United States</strong> has taken many steps to ban Huawei.’</p><ul><li><strong>‘In 2018</strong>, the Trump administration banned U.S. federal agencies from using the telecom giant’s equipment. (Huawei has since sued the United States over the restriction.)’</li><li><strong>‘That same year</strong>, following pressure from regulators, AT&T walked away from a deal to sell Huawei’s smartphones.’</li></ul><p><strong>‘U.S. actions against Huawei</strong> culminated with the Commerce Department adding the company to its “entity list” in May 2019, essentially banning Huawei from buying U.S. goods without the government’s permission.’</p><ul><li><strong>‘Huawei relies on American </strong>software, chips, specialty lasers, and other products.’</li><li><strong>‘Days after the announcement</strong>, Google said it would restrict Huawei’s access to its products, including its Android operating system.’</li></ul><h5>Can Huawei survive the bans?</h5><p><strong>‘It’s not just the United States</strong> that has banned Huawei. Washington has pressured its allies to prevent Huawei from developing 5G infrastructure in their countries, even threatening to stop sharing intelligence with countries that use Huawei.’</p><ul><li><strong>‘Australia and Japan </strong>effectively banned the company from building 5G networks in 2018.’</li><li><strong>‘Other countries</strong>, such as Canada, the Netherlands, and New Zealand, are considering bans.</li></ul><p><strong>Experts expect</strong> that Huawei will survive the bans, including the U.S. blacklisting, but not without suffering damage.’</p><ul><li>‘“<strong>It certainly will</strong> cause massive dislocations and probably loss of markets in the short term, but it’s unlikely to basically kill the company,” says CFR’s Segal.’</li></ul><p><strong>‘At the same time</strong>, analysts say, U.S. companies could also be hurt by the bans.’</p><ul><li><strong>‘About</strong> 1,200 U.S. companies are Huawei suppliers, and U.S. telecom firms have said that banning Huawei products would set back the development of 5G in the United States by several years.’</li></ul><h5>Why are some countries resisting the bans?</h5><p><strong>‘Other countries</strong>, especially those participating in China’s <a href="">Belt and Road Initiative</a>, are already using or have agreed to use Huawei’s equipment.’</p><ul><li><strong>‘The company has dominated</strong> 5G, providing high-quality networks for prices estimated to be 30 percent less than those of its competitors.’</li><li><strong>‘It is also a leader in innovation</strong>, owning more patents[PDF] for 5G infrastructure than any of its competitors.’</li></ul><p><strong>‘Russia’s 5G network</strong> will be built with Huawei’s help, and Malaysia’s prime minister, Mahathir Mohamad, has said the country will <a href="" target="_blank">use Huawei’s technology</a>.’</p><ul><li><strong>‘The company’s equipment</strong> had also been used by some smaller <a href="" target="_blank">rural telecom companies</a> in the United States.’</li></ul><p><strong>‘Authorities in potential markets</strong>, such as Germany and the United Kingdom, have argued that any 5G supplier comes with certain risks, given the nature of the networks.’</p><ul><li><strong>‘These governments claim</strong> that they can minimize national security concerns and manage the risks of using Huawei.’</li><li><strong>‘Officials in these countries</strong> also say they prefer to keep their auctions for 5G construction open to all firms and tighten security measures in general.’</li><li>‘“<strong>Our approach is not to simply</strong> exclude one company or one actor,” said German Chancellor Angela Merkelin March 2019, “but rather we have requirements of the competitors for this 5G technology.”’<strong></strong></li></ul></td></tr>

4. Mao Redux: The Enduring Relevance of Self-reliance in China

<tr><td class="bg-holder"><img width="100%" src="" alt="CHINADebate"></td></tr><tr><td class="nl-post"><p class="caption">MarcoPolo</p><p class="excerpt">For the CCP, political independence and economic independence are inseparable’.</p><p><strong>NOTE:</strong> If you not a regular consumer of <a href="">MacroPolo</a>’s China research and analysis, you are missing some of the best some of the best work being produced today.</p><ul><li><strong><a href="" target="_blank">MacroPolo</a></strong> is relatively new think tank, part of the [Hank] Paulson Institute at the University of Chicago – and the analysis is terrific.</li><li><strong>The site is</strong> a little difficult to navigate, so you have to look into the nooks and crannies. But the effort is worth the result.</li><li><strong>So, go to </strong><a href="" target="_blank">MacroPolo</a> and BOOKMARK NOW!</li><li>And be sure to subscribe to the <a href="" target="_blank">MacroPolo</a> mailing list.</li></ul><p>‘<strong>Pundits are </strong>particularly fond of likening Xi Jinping to Chairman Mao,’ writes <a href="" target="_blank">Neil Thomas</a> of MarcoPolo, in <a href="" target="_blank">‘Mao Redux: The Enduring Relevance of <u><span class="u-red">self-reliance</span></u> in China.’</a>’</p><ul><li><strong>‘Xi’s accumulation</strong> of personal political power, purging of opponents, and removal of presidential term limits all lend credence to the comparison.’</li><li><strong>‘Some of the latest</strong> evidence that “Xi is the new Mao” is his supposed “revival” of the Maoist concept of “<u><span class="u-red">self-reliance</span></u>” (<em>zili gengsheng</em>).’</li></ul><p><strong>‘But talk of a rapid revival</strong> of Maoism under Xi is off the mark.’</p><ul><li><strong>‘Xi is hardly the first head</strong> of the Chinese Communist Party (CCP) to be inspired by Mao Zedong Thought.’</li><li><strong>‘In fact</strong>, <u><span class="u-red">self-reliance</span></u> is a good case study of the abiding relevance of certain ideas in CCP thought.’</li></ul><p><strong>‘While</strong> <u><span class="u-red">self-reliance</span></u> was championed by Mao, it is a concept that has been supported by all subsequent leaders, even if its application has evolved over time.’</p><ul><li><strong>‘That’s because</strong> <u><span class="u-red">self-reliance</span></u> fundamentally means that the CCP will retain ultimate control over China’s economic development—an enduring consensus that has heavily influenced policy across generations of leaders.’</li></ul><p><strong>‘In many ways</strong>, Xi has built upon longstanding CCP principles that are larger than himself.’</p><ul><li><strong>‘Misinterpreting </strong>such concepts as merely “Xi issues” actually diminishes their importance as core “CCP issues” that would likely be pursued irrespective of who holds power in Zhongnanhai.’</li></ul><p><strong>‘As the US-China trade war</strong> and technology competition escalated during 2018, Xi, on an inspection tour of China’s northeast “rust belt” in September 2018, complained that rising “protectionism” means that “key technology is becoming harder to obtain internationally” and that China was thus “forced to take the road of <u><span class="u-red">self-reliance</span></u>.”’</p><ul><li><strong>‘Xi reiterated</strong> this call for <u><span class="u-red">self-reliance</span></u> several times over the next few months: at a visit to an exhibitionto celebrate 40 years of Reform and Opening in Guangdong in October, at the China International Import Expo in November, and also in his 2019 New Year speech.’</li></ul><p><strong>‘For many</strong>, this was a stunning admission of Xi’s true political colors.’</p><ul><li>‘His invocation of the concept was described variously as a “long-discarded Maoist slogan,” a “<a href="">Maoist bet”</a> on the Chinese economy, or even a turn toward becoming like “isolationist North Korea.”’</li><li><strong>‘Some worried</strong> that Xi’s emphasis on <u><span class="u-red">self-reliance</span></u> might lead China “toward stagnation” by undoing the openness that enabled its economic progress.’</li></ul><p><strong>‘Among the commentariat</strong>, <u><span class="u-red">self-reliance</span></u> was often equated with autarky, or complete self-sufficiency in producing goods and services.’</p><ul><li><strong>‘But</strong> <u><span class="u-red">self-reliance</span></u> is not the same as autarky and the concept has never been discarded by the CCP.’</li><li><strong>‘Even at the height</strong> of Maoist <u><span class="u-red">self-reliance</span></u>, it did not translate into autarky, and ideology was not divorced completely from economic reality.’</li></ul><p><strong><u><span class="u-red">self-reliance</span></u></strong> was borne out of wartime necessity.’</p><ul><li><strong>‘Mao proclaimed</strong> the virtues of <u><span class="u-red">self-reliance</span></u> as early as January 1945, when the CCP was forced to operate out of the remote Shaan-Gan-Ning border region while fighting both Japanese invaders and Nationalist forces under Chiang Kai-Shek.’</li><li><strong>‘Anxious</strong> to assert his patriotic credentials in the Chinese Civil War, Mao framedthe CCP’s <u><span class="u-red">self-reliance</span></u> as “the very opposite” of Chiang’s dependence on US military aid.’</li></ul><p><strong>‘The continued salience</strong> of <u><span class="u-red">self-reliance</span></u> during Reform and Opening highlights the common confusion between <u><span class="u-red">self-reliance</span></u> and self-sufficiency.’</p><ul><li><strong>‘The Chinese for</strong> <u><span class="u-red">self-reliance</span></u>—<em>zili gengsheng</em>—literally means “regeneration through one’s own efforts.”’</li><li><strong>‘Kenneth Lieberthal</strong>, renowned China specialist, described <u><span class="u-red">self-reliance</span></u> as the CCP’s desire to “keep the initiative in one’s own hands” by minimizing China’s economic dependence on any particular country or bloc.’</li></ul><p><strong>‘Like any political concept</strong>, the meaning of “<u><span class="u-red">self-reliance</span></u>” in China has evolved over time, as leaders adapted the conceptual framework to fit new economic and political realities.’</p><ul><li><strong>‘Mao, while receptive</strong> to some essential foreign trade and technology, often dialed up <u><span class="u-red">self-reliance</span></u> into a push toward autarky.’</li><li><strong>‘Deng chose to preserve</strong> <u><span class="u-red">self-reliance</span></u> in CCP thought but used it as a foundation to anchor the widescale yet measured opening of China’s economy to the world.’</li><li><strong>‘After this phase </strong>of opening peaked under Jiang, Hu then linked <u><span class="u-red">self-reliance</span></u> to a concerted push for indigenous innovation, which has continued and intensified under Xi.’</li></ul><p><strong>‘Xi is carrying</strong> the torch of this long-established connection between <u><span class="u-red">self-reliance</span></u> and technological advancement.’</p><ul><li><strong>‘In June 2014</strong>, Xi vowedthat China would not be “the technological vassal of other countries.”’</li><li><strong>‘And </strong>said in October 2018 that: “The starting point for the struggle of the Chinese nation is <u><span class="u-red">self-reliance</span></u>, the only way to ascend the commanding heights of the world of science and technology is indigenous innovation…”’</li></ul><p><strong>‘Xi likely chose</strong> to spotlight <u><span class="u-red">self-reliance</span></u> in late 2018 as a response to the imminent threat the US-China trade war posed to high-tech supply chains.’</p><ul><li><strong>‘But the CCP’s emphasis</strong> on <u><span class="u-red">self-reliance</span></u> has nonetheless increased throughout Xi’s tenure, as Beijing used indigenous innovation as a broad platform to bolster domestic production and manufacturing to achieve parity with foreign technological leadership (see Figure 4).’</li></ul><p></p><img width="100%" src="" alt="CHINADebate"><p><strong>‘Still, nationalism</strong> is not the only reason why a Chinese leader might favor greater <u><span class="u-red">self-reliance</span></u>.’</p><ul><li><strong>‘This trend fits</strong> with a long-term economic objective—of which “<a href="" target="_blank">Made in China 2025</a>” was just one manifestation—of moving domestic manufacturing up the value-added chain, a prescription that economists have long deemed necessary for China to <a href="" target="_blank">avoid the middle-income trap.</a>’</li><li><strong>‘For the CCP</strong>, “political independence and economic independence are inseparable.”’</li></ul><p><u><span class="u-red">self-reliance</span></u> happens to be one of a handful of Maoist concepts that still held political currency after Reform and Opening.’</p><ul><li><strong>‘But it is also larger</strong> than Mao or Xi—the idea is a defining feature of the CCP’s worldview and may also partly explain why China is something of a lonely superpower bereft of true allies.’</li><li><strong>‘Xi may have found it</strong> expedient to emphasize <u><span class="u-red">self-reliance</span></u> amid the trade war, but it will continue to inform Chinese economic strategy long after he leaves office.’</li></ul></td></tr>