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1. South China Sea Exercises Highlight Continuing Tensions

What Happened: China initiated a series of military drills in the South China Sea this week in response to U.S.-Philippine joint exercises, as tensions in the region continue to simmer.

The Details: The Philippine and U.S. navies held exercises last week intended to reaffirm "both nations' commitment to bolstering regional security and stability" and enhance “combined readiness and capabilities in support of a free and open Indo-Pacific," a spokesperson for the U.S. Seventh Fleet said.

• The U.S. Navy and the Philippines both contributed several ships and aircraft.

China’s Response: In response, the PLA Southern Theater Command issued a statement saying it carried out what it called a “routine patrol” in the South China Sea.

• The statement added that “all the troops of the theater command remain on high alert at all times to resolutely safeguard national sovereignty, security and maritime rights and interests.”

The Bigger Picture: Tensions between the Philippines and China have been on the rise since Philippine President Ferdinand Marcos Jr. came to power in 2022, and have increased sharply in recent months amid escalated maritime activity by China. The Philippines has also become more assertive in administering its maritime and territorial claims in the South China Sea, which China views as provocative and destabilizing. 

Why It Matters: The Philippines is a U.S. treaty ally. Despite an ongoing attempt by Beijing and Washington to stabilize their relationship, they still risk being inadvertently pulled into a conflict by a crisis involving third countries in the region.

• Meanwhile, recent reporting suggests that the United States is likely to increase the number of its aircraft carriers deployed in the Western Pacific this year from three to five.

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

Learn More: Read more on the unique role Chinese public opinion may play in regional disputes in Future Crisis in the Indo-Pacific: The Shadow of Public Opinion, by Center for China Analysis Fellow on Foreign Policy and National Security Andrew Chubb.

2. China and Russia Aim for “New Momentum”

What Happened: Xi Jinping held a call with Vladimir Putin last week, telling the Russian leader that China and Russia should “cultivate new momentum,” “strengthen strategic co-ordination,” and work together to “resolutely oppose external interference in their internal affairs.”

The Bottom Line: Putin’s foreign policy advisor Yuri Ushakov said the two leaders focused on how they both “do not and will not accept” U.S. policy toward them. “The most important thing is that the leaders of the two countries understand that the U.S. practically has a policy of dual containment of Russia and China,” he said.

• They also pledged to “maintain the stability” of their shared supply chains in the face of geopolitical pressure, alluding to sanctions.

Between the Lines: Xi’s stated view that Washington’s goal is to “contain and suppress” China, along with his belief that the United States is deeply ideologically opposed to the continued existence of the Chinese Communist Party, is spurring him to double down on his relationship with Putin, who shares similar beliefs.

Why It Matters: After initially wavering over how closely it should back Russia following its invasion of Ukraine, China has steadily ramped up material and rhetorical support for the country. This call may signal an amplification of that support and further undermine the West’s attempts to isolate Russia and impede its advance in Ukraine.

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

Learn More: Read What Lies in Wait for Xi and Putin in the Year of the Dragon? by Philipp Ivanov, and Interpreting Xi Jinping's Shifting Strategy on the Russia-Ukraine War, by Guoguang Wu, both part of the Center for China Analysis’ series on China-Russia relations.

3. Xi’s New Year’s Greetings Spell Trouble for Former Defense Minister

What Happened: Wei Fenghe, a career artillery officer who served as defense minister and state councilor from 2018 until his retirement in March 2023, was notably absent from the list of retired party leaders whom Xi Jinping and other top cadres acknowledged ahead of Lunar New Year.

• Media reports listed some 130 “old comrades” in good political standing who received well wishes, including all of Wei Fenghe’s predecessors as defense minister.

Between the Lines: Wei’s exclusion likely confirms that he is in deep political trouble, following rumors that he is being probed for corruption.

• Wei’s purge probably relates to an expanding anti-corruption investigation into missile procurement that has already felled Li Shangfu (Wei’s successor as defense minister), as well as Zhou Yaning and Li Yuchao (both former rocket force commanders, a position Wei held from 2012 to 2017). Dozens of other serving and retired PLA officers have been implicated.

The Bigger Picture: Suspicions are falling on China’s broader military-industrial sector. On February 5, the Party announced a disciplinary investigation into Long Fei, a former executive at China Aerospace Science and Industry Corporation, a missile manufacturer. Wang Xiaojun, a former director of the China Academy of Launch Vehicle Technology, was expelled from the Party in January.

Why It Matters: Further revelations about the extent of corruption in the rocket force and China’s military-industrial complex will only reinforce whatever suspicions Xi has about the reliability of the PLA.

• The more he doubts the PLA’s combat readiness, the less likely he may be to contemplate initiating regional conflict in the near term.

By: Neil Thomas, Fellow on Chinese Politics, Center for China Analysis

Learn More: Check out Neil’s new paper on Xi Jinping’s Succession Dilemma and the broader problem of political trust.

4. China’s Surge in Energy Storage

What Happened: China's renewable energy generation capacity surpassed coal power for the first time in history in the first half of 2023. Key to achieving this milestone has been a major expansion of energy storage infrastructure, particularly in the form of new types of batteries.

One Glowing Example: A new energy storage station in Nanjing, where 88 white battery cartridges with a storage capacity of nearly 200,000 kilowatt-hours transmit electricity to the city's grid.

• The station “is equivalent to a medium-sized power plant, and the electricity it generates in one hour can meet the power consumption of 26,000 households in one day," according to Shi Shengdong, a local grid manager.

The Bigger Picture: Lithium-ion batteries accounted for 97.4% of China's new energy storage capacity at the end of 2023.China continues to diversify and expand its options by investing in and developing other energy storage technologies, such as liquid flow batteries and compressed air and flywheel energy storage systems.

Why It Matters: Amid ongoing geopolitical instability, volatility in global supply chains, and increased extreme weather events, energy security has become a key priority for China. By expanding storage capacity, China can ensure uninterrupted power even in the event of disasters, furthering President Xi’s goal of promoting resilience and achieving self-sufficiency. 

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

Learn More: Read why it’s likely that China Will Accelerate Climate Resilience as a Security Priority this year in China 2024: What to Watch.

 5. China’s “Spontaneous” Stock Market Rally

What Happened: Hundreds of publicly listed companies in mainland China announced stock buybacks or other measures to “enhance corporate quality” in a state-led effort to bolster the stock market and overall investor confidence amid months of sliding markets.

• The CSI 300 index of Shanghai- and Shenzhen-listed stocks has so far gained about 6% in response.

Between the Lines: “Enhance corporate quality” — a term many companies used in their announcements — appeared in a speech by Premier Li Qiang at the State Council’s Executive Meeting on January 22, 2024. Though it is not clear what the phrase is supposed to mean, this hasn’t prevented firms from picking up on the hint.

• Many Shanghai-listed companies are explicitly promising share buybacks or announcing that key shareholders are increasing their holdings as a show of confidence, while companies listed in Shenzhen have been more discreet, saying they aim to achieve the “dual enhancement of corporate quality and shareholders' returns.”
• These actions also come after Vice Premier He Lifeng’s call to “promote the high-quality development of listed companies” during a meeting on January 29.

Worth Noting: Hong Kong-listed companies have not made similar announcements, but the Hong Kong stock exchange loosened restrictions on share repurchases in October on the recommendation of a task force that the government convened to come up with ideas to promote liquidity in the tumbling market.

Why It Matters: Incidents like this demonstrate Beijing's ability to influence the decisions of listed companies and its continued emphasis on maintaining market stability as a political priority.

By: Gavin Xu, Intern, Center for China Analysis

Learn More: Read why it’s likely Xi’s Prioritization of Security Will Continue to Weigh on Growth in China 2024: What to Watch.