Summary of today’s Essential Eight:
1. Xi’s busy Tuesday - Xi met with the visiting Prime Minister of Fiji and a delegation from the Inter-Parliamentary Union (IPU). He also met with the Olympic team.
2. Xi meets with Olympic team - Xi and several of his Standing Committee colleagues met with the Olympic team. Li Qiang did not attend as he was on his way to Moscow. Xi told them that “everyone remembered the trust placed in them by the Party and the people, with vows such as "National honor always surpasses personal honor" and "I dedicate this gold medal to the great motherland" resonating powerfully. They demonstrated a deep love for the motherland, a determination to bring glory to the country, a belief in victory through tenacity and self-reliance, the valuable quality of teamwork and fighting side by side, and the sunny disposition of the confident, optimistic, and friendly Chinese youth. You have shown the world the profound heritage of Chinese traditional culture, the open, inclusive, and progressive spirit of contemporary China, and the ambition, vigor, and confidence of the Chinese people. The motherland and the people are proud of you and applaud you”. He also praised them for having “clean 干净” gold medals.
3. Biden Administration reacts to PRC’s evolving nuclear strategy - David Sanger of the New York Times reported today that President Biden approved “in March a highly classified nuclear strategic plan for the United States that, for the first time, reorients America’s deterrent strategy to focus on China’s rapid expansion in its nuclear arsenal.” Many researchers and analysts have been surprised by the shift in the PRC’s nuclear strategy under Xi, and there is a chance the US government may still be underestimating Xi’s goals. The Third Plenum Resolution reiterated the call to “speed up the development of strategic deterrence forces”, and as Tong Zhao of Carnegie warned in a report last month “contemporary Chinese leaders, particularly Xi, have elevated the political importance of nuclear weapons. Coupled with significant changes in China’s domestic political system in recent years, this has led to a nuclear policy that is less cohesive, less coherent, and less aligned with China’s specific security requirements than before. These complex political dynamics remain largely ignored by international policymakers and analysts.”
4. EU moving forward with tariffs on PRC EVs - The European Commission issued a draft of definitive findings in the anti-subsidy investigation into PRC EVs. They made tweaks to tariff rates for some of the PRC firms, the biggest being a cut to the additional tariff on Teslas imported from the PRC to 9% from the 20.8% mooted in July. A formal vote will occur in October, and EU officials keep signaling to the PRC that they are open to a deal if the PRC proposes something meaningful.
5. More on the latest PRC-Philippines tensions - The Philippines side has suggested diplomacy to address the latest ship collisions. The US and several other countries issued statements of support for the Philippines, and the US statement in particular caused upset on the PRC side, as they blame the US for encouraging and emboldening the Philippines. The “Jun Sheng 钧声” column of the PLA Daily accused the country of “bootlicking”, writing that “turning a blind eye to such goodwill and sincerity from China, Manila has kept making provocations, not only violating the interim arrangements agreed upon by both sides on the provision of living supplies to the illegally grounded Philippine vessel at Ren'ai Jiao but also sending vessels and aircraft to intrude into sea areas and airspace around China's islands and reefs in the South China Sea. What's worse, Manila has even gone so far as to willingly act as a pawn for external forces that wish nothing but chaos and tension for the South China Sea. Its bootlicking behavior is condemned by regional countries.”. We discussed this latest incident in depth on this week’s episode of Sharp China that drops Wednesday.
6. Price cutting in new real estate developments - More and more cities are doing away with restrictions on developers pricing new homes below a set level. Allowing more influence from the market may quicken sales but it will likely cause prices to drop even more. Will local officials allow prices to drop another 30% or more? How would declines of that magnitude affect land sales, and consumer confidence?
7. China accelerating nuclear power project construction - Jiemian has the details of the five nuclear power projects approved at the Monday State Council executive meeting. The projects are in Jiangsu, Shandong, Guangdong, Zhejiang and Guangxi and involve 11 new units, for a likely investment over the next five years of 220 Billion RMB. Jiemian also notes that the August 11 document “Opinions on Accelerating the Comprehensive Green Transformation of Economic and Social Development” called for the “acceleration of the construction of clean energy bases such as wind power and photovoltaic power in the northwest, hydropower in the southwest, offshore wind power, and coastal nuclear power”.
8. Harris advisor calls for a “Clean Energy Marshall Plan” - Brian Deese, director of the White House National Economic Council from 2021 to 2023 and as of a couple of weeks ago an advisor on economic policy to Vice President Harris, has an article in the latest issue of Foreign Affairs calling for the US to lead an effort to help “countries most vulnerable to the effects of climate change” transition to clean energy, while ensuring that China does not control the supply chains for clean energy technology. Deese writes that “China is pursuing a state-led strategy of investing in domestic manufacturing capacity rather than in greater domestic demand or a stronger social safety net. For some goods, such as electric vehicles, batteries, and solar panels, China explicitly aims to dominate global manufacturing. That strategy is fundamentally unsustainable for the global economy...As part of the Clean Energy Marshall Plan, Washington must level the global playing field through the active yet measured use of trade tools such as tariffs. Doing nothing and being resigned to China’s statist approach is neither economically nor politically sustainable”.
