International
India drops Huawei and ZTE and scraps rail contract following border clashes. Senior Indian government officials say New Delhi will steadily pare back its economic ties with China after a period of cultivating president Xi. The Indian government will bar Chinese companies from providing any telecom equipment to state-run telcoms firms and may also prohibit private mobile phone operators from using gear supplied by the likes of Huawei and ZTE. Indian Railways on Thursday decided to scrap project contracts awarded to Chinese firms, citing poor progress. FT, Economic Times, India TV, 18 June
Australia targeted by state-sponsored cyber attack. A sophisticated, state-sponsored cyber attack is targeting Australian government, business, education and political organisations, the prime minister has warned. Scott Morrison did not reveal the identity of the state actor that was responsible for the attacks, which he said had been launched over many months. But the scale and sophistication of the malicious activity prompted cyber-security experts to speculate that China was the most likely culprit. This comes amid escalating trade tensions between the two Pacific nations. FT, 19 June
‘Naive’ Europe must snub China if it refuses market access, says ex-Nato chief. Anders Fogh Rasmussen said: “If China would not accept the principle of reciprocity, then the European Union should in exchange start to cut off the production line with China… start to discuss how to move production away from China, how to locate companies in more stable [and] reliable countries in Asia or Eastern Europe.” He noted: “After many years in international politics, I’ve learnt that autocrats respond to strength” SCMP, 18 June.
China Indicts two Canadians on Spying Charges, Escalating Huawei Dispute. Michael Kovrig and Michael Spavor were detained in 2018 amid heightening tensions between Canada and China. Chinese officials said on Friday they had indicted two Canadians on charges of espionage, escalating Beijing’s punitive campaign against Canada over the arrest of a top executive of the Chinese technology giant Huawei. NY Times, 19 June
Economist: Can Zoom be trusted with users secrets? “Some governments, such as Britain’s, have reportedly been warned by spy agencies to avoid secret discussions about China on Zoom.” Economist, 19 June
Hong Kong
New wording in law draft raises opposition fears. Pro-democrats in Hong Kong have raised concerns about an unexpected change of wording in the draft national security law unveiled in Beijing – which now criminalises collusion with foreign forces – saying the central government could now easily use the legislation against prominent pro-democracy figures in Hong Kong. RTHK, 18 June
Children’s clothing shop told to remove pro-democracy statue. Apple Daily, 17 June
G7 criticism of Beijing over Hong Kong censored in China. Twitter, 18 June
China could ship Hong Kong Brits to gulags. The Sun, 18 June
Trump floats idea of “complete decoupling from China.” Twitter, 18 June
Beijing criticises US Uygur Human Rights Policy Act. Xinhua, 18 June
US-China talks: Mike Pompeo’s seven-hour meeting with Yang Jiechi ‘helps atmosphere’ – but differing statements show divisions remain. SCMP, 18 June
Economy/Tech
Huawei delays production of flagship phone after US crackdown. Nikkei Asian Review, 17 June
Rhodium report finds FDI out of China down but FDI inward up, as investors seek access to leading technologies. Rhodium, 18 June
Brussels toughens efforts to level the playing field with China. Brussels is seeking to prevent foreign state-subsidised companies from undercutting EU rivals when bidding in the highly lucrative public procurement market. “Reciprocity is not there,” said Manfred Weber, the German leader of the centre-right European People's party in the EU parliament. “In some fields China is a partner. But in the economic field it is a clear competitor.” FT, 19 June
EU chamber chief complains about one-way openness. “Ericsson in snatching up orders (in the Middle East) and Africa and Asia, and, of course, in Europe it is competing with Huawei head on,” he said.“But they can’t really compete here, which of course gives you a very, very big disadvantage, because China is 50% of the possible 5G market.” Reuters, 18 June
The Telegraph reports on firms’ efforts to reduce their exposure to China. It says it will spark industries not previously profitable, including mining of rare earths in the US. It notes “In an EY survey this May, 83pc of companies said they expected to focus on “regionalisation” of supply chains.” Telegraph, 19 June
Chinese banks: lending an arm and a leg. FT, 18 June
Longer reads & opinion
Why China Bullies. The Economist, 19 June
Wang Jisi on why US-China relations are worse than cold war. “People tend to draw a comparison between China-U.S. ties today and Soviet-U.S. ties in the Cold War period. In my view, China-U.S. ties today may be even worse than the Soviet-U.S. relationship because the latter was at least “cold.” Moscow-Washington relations remained essentially stable for more than four decades despite a few sporadic “hot” moments like the Cuban missile crisis in 1962. Those two superpowers were separate from each other politically, economically, and socially and were actually unable to influence each other’s domestic affairs. The contact between Washington and Moscow was rather superficial and involved little love-hate emotion. In contrast, the China-U.S. relationship is now suffering from forceful disengagement after steady progress in engaging each other for four decades. The sentimental and material losses caused by the heated quarrels and grudging decoupling between the two sides, in particular during the pandemic period, are sensationally more distressing than the analogy of the Cold War.” Caixin 18 June
Martin Wolf: what trade wars tell us. FT, 18 June
FT Editorial Board: A dangerous stand-off in the Himalayas. FT, 18 June
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