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THIS WEEK:

Taiwan’s former leader meets Xi Jinping, the U.S. Treasury Secretary flags overcapacity, and U.S.-China militaries talk safety at sea.

1. Xi Jinping Meets Ma Ying-jeou in Beijing

What Happened: On April 10th, 2024, Xi Jinping met with former Taiwanese President and KMT Chairman Ma Ying-jeou in the East Hall of the Great Hall of the People, which serves as the venue for Xi's meetings with foreign heads of state

Adhering to Principle: Xi and Ma both emphasized the 1992 Consensus on the one-China principle and stated their opposition to Taiwan independence. They also asserted that "both sides of the Taiwan Strait belong to the Chinese nation”—with this term appearing 21 times in Xi’s speech.

External Forces: Xi also stressed his "opposition to interference from external forces" during his meeting with Ma. This phrase reflects the adjustment of China’s policy towards Taiwan after the 20th National Congress, with a new emphasis placing equal importance on opposing "Taiwan independence" and "interference from external forces."

Why It Matters: While Ma visited in his personal capacity, the meeting bolstered Xi’s domestic case that his policy of “reunification” has garnered support among some political elites in Taiwan. With Lai Ching-te’s inauguration as Taiwan’s president to take place on May 20, all eyes will be on China to see how it responds to another term under the DPP.

By: Gavin Xu, Intern, Center for China Analysis

Learn More: Lyle Morris unpacked the implications of Lai Ching-te’s election in Taiwan’s Democracy on Full Display.

2. China Dismisses “Overcapacity” Concerns

What Happened: In a press briefing Monday, Chinese Vice Finance Minister Liao Min responded to U.S. Treasury Secretary Janet Yellen’s complaints about manufacturing overcapacity during her visit to China last weekend.

What Yellen Said: Yellen asserted that “China is now too large for the rest of the world to absorb (its) enormous capacity,” adding, “when the global market is flooded by artificially cheap Chinese products, the viability of American and other foreign firms is put into question.”

China’s Blistering Retort: Liao Min said that “so-called ‘overcapacity’ is a manifestation of the market mechanism at work,” and declared that China’s competitive advantages are inseparable from its huge investment in innovation and its “unremitting entrepreneurial spirit.” He also emphasized that China is implementing major initiatives to deepen reforms and further open its markets.

Why It Matters: China will not give up its massive advantage in manufacturing capacity – its most important geopolitical competitive advantage vis-à-vis the United States – simply because Washington is feeling the heat. Yellen’s statement that American industry is no longer competitive will be taken in China and many other countries as an admission of the failure of U.S. industrial policy.

By: Nathan Levine, Research Fellow, Center for China Analysis

Learn More: Lizzi C. Lee discussed Beijing’s technology ambitions in What Happened at China's Two Sessions in 2024?

3. Premier Li Defends Green Industry Push 

What Happened: While in Beijing, Secretary Yellen also pressed China on renewables, saying excessive Chinese exports, especially new energy vehicles and solar modules, could undercut American interests and lead to “global spillovers."

China’s Response: Premier Li Qiang responded that “China’s new energy industry will make an important contribution to the global green and low-carbon transformation.” He also expressed that “China is ready to step up policy coordination with the U.S. on issues such as climate change.”

Different Interests: China’s push to develop globally competitive new energy industries shows how its economic and environmental interests are increasingly aligned, and this could propel the country’s climate action. However, U.S. and other foreign automakers have expressed alarm that a wave of Chinese electric vehicle exports could pose an "existential threat."

Why It Matters: The U.S. and China are two of the world’s most important players when it comes to climate action. Escalating bilateral tensions over green industrial competition could jeopardize much-needed progress on the international climate agenda.

By: Taylah Bland, Affiliated Fellow on Climate and the Environment, Center for China Analysis

Learn More: Read Two Sessions: China’s Latest Climate Directives, by ASPI’s Li Shuo and Taylah Bland

4. U.S.-China Maritime Safety Talks

What Happened: The U.S. and Chinese militaries convened a meeting in Honolulu of the Military Maritime Consultative Agreement Working Group — the first since December 2021 — where they reviewed safety-related events and discussed how to sustain maritime and aviation operational safety and professionalism.

The Details: The U.S. emphasized that “open, direct and clear communications with the PLA and with all other military forces in the region is of utmost importance to avoid accidents and miscommunication.” China pointed out the need for U.S. actions in the region to not “endanger Chinese sovereignty and security under the guise of freedom of navigation and overflight.”

An Unsafe Trend: This is the first meeting of the working group since the U.S. Department of Defense issued an unprecedented statement asserting that unsafe intercepts of U.S. and allied aircraft by China in international airspace were a part of “a centralized and concerted campaign” to “coerce a change in lawful U.S. operational activity.”

Why It Matters: The willingness to hold the MMCA reflects a desire by both sides to prevent incidents at sea and in the air from escalating into unintended conflict.

By Lyle Morris, Senior Fellow on Foreign Policy and National Security, Center for China Analysis

Learn More: Read more about how public opinion might shape China’s response to maritime incidents in Future Crises in the Indo-Pacific: The Shadow of Chinese Public Opinion by Andrew Chubb.

5. The Baijiu Economy: Moutai Reports Record Profits

What Happened: Kweichow Moutai reported a 19 percent rise in net profit for 2023, after hiking wholesale prices by 20 percent and a surge in direct-to-consumer online sales during the year.

Leading with Liquor: Kweichow Moutai has been one of the most valuable companies traded on a Mainland stock exchange since 2020, when its local market capitalization surpassed that of China’s largest bank. But Beijing has struggled to keep this corporate behemoth in check: in the past three years, two former chairmen received life sentences for accepting bribes.

A Hot Commodity: The prodigious demand for Moutai has inspired counterfeiters, smugglers, and auction houses. As Sotheby’s held its first all-Moutai auction in Hong Kong last week, Nanjing’s Customs Bureau reported a major case involving illegal reimports from countries where Moutai’s shelf price is lower than in China.

Why It Matters: Kweichow Moutai’s unflagging market strength is built on complex social and cultural dynamics, not least its consumers’ preoccupations with status, scarcity, and authenticity. Nevertheless, the company’s strong financial results show the potential for domestic consumption to help drive an economic recovery.

By: G.A. Donovan, Fellow for Chinese Political Economy and Society, Center for China Analysis

Learn More: Read this timeless paper from our site: What Is Baijiu? A Primer to China's Infamous Alcoholic Staple.