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1. China’s Big Economic Bet on Green Industry

What Happened: Beijing has been surging capital into key “green industries,” such as electric vehicles (EVs), batteries, and renewable energy components, in the hope of cornering global markets and providing a new cornerstone for China’s sluggish economy.

The Details: The above examples, dubbed the “New Three” industries by Chinese officials, are becoming key sectors in Beijing’s push to find new growth drivers. They hope that growing global demand for green technologies means that Chinese companies' existing lead in these emerging industries can, if combined with concentrated investment, be translated into market dominance and a lasting source of economic growth.

Reality Check: It’s not clear how much growth from declining drivers like real estate these sectors can really replace. These manufacturing industries are also already at overcapacity in China’s domestic markets and have attempted to capitalize via exports. In response, key markets like Europe and the United States have increasingly begun to impose trade restrictions on these products, fearing precisely the Chinese market dominance that Beijing hopes to achieve.

• Chinese EV leader BYD has therefore begun to preemptively pivot toward ASEAN markets. With a recent launch in Indonesia, the company plans to double its sales outlets in Singapore and the Philippines.

Why It Matters: China has already established itself as an international leader in renewable energy and EVs. If Beijing further scales up its exports of these technologies and products that would likely lower their cost worldwide — which could be a big win for the international community’s fight against climate change, but also a big challenge for trade and economy-minded officials across the developed world. 

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” and “China Will Act to Reestablish its International Climate Leadership,” two of the Center for China Analysis’ top ten predictions for the year ahead in its new inaugural annual report, China 2024: What to Watch.

2. Beijing Weighs Security Over Growth in Hong Kong

What Happened: Officials in Hong Kong announced Tuesday that the territory will enact a strict, previously-shelved security law that will further expand the definition of offenses related to treason, secession, subversion, and theft of state secrets, among other crimes.

• Hong Kong’s leader, John Lee, said the purpose was “to protect us from attacks by foreign forces and by foreign countries.
• ”Beijing’s top official in Hong Kong, Zheng Yanxiong, insisted that development and national security must go together like “two wheels of a cart” or “two wings of a bird.”

Between the Lines: Zheng was echoing the official line of Chinese leader Xi Jinping, who in recent years has made “comprehensive national security” a top priority. 

Reality Check: The security legislation is likely to only further disturb international businesses and investors already concerned about diminishing freedoms and growing legal risks to operating in Hong Kong.

• And this isn’t just a problem in Hong Kong: multinationals are continuing to increasingly “de-risk” or even withdraw from mainland China as the growing obsession with security weighs on the business environment.

Why It Matters: China is striving to reverse slowing economic growth rates, including by attracting foreign capital and encouraging private sector entrepreneurship, consumer confidence, and overall dynamism. But Beijing’s obsession with tighter security continues to work against all of these ambitions.

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

Learn More: Read more about why the Center for China Analysis expects “Xi’s Prioritization of Security Will Continue to Weigh on Growth” and why “China’s Economy Will Continue to Struggle” in China 2024: What to Watch.

3. Third Plenum on Economy is Unlikely Until Late 2024

What Happened: On January 31, Xi Jinping chaired a monthly meeting of the Politburo that some had predicted might set the date of the Party’s long-awaited Third Plenum, where many observers hope for the announcement of new economic reforms. However, the readout made no mention of a Third Plenum.

• Plenary meetings or “plenums” approve major policy documents.

Between the Lines: Based on precedent, the likeliest time for the Third Plenum is now later this year, in October or November. The Politburo usually announces plenums at least a month or two in advance, but there is still a chance of it being held before the annual Two Sessions parliamentary gatherings beginning on March 4.

• In 2018 the Politburo met on January 12 to announce a special Second Plenum on January 18-19, so Xi could use next month’s Politburo meeting to call a Third Plenum.
• But, if so, it would likely focus narrowly on outstanding personnel issues — such as expelling purged ministers Qin Gang and Li Shangfu from the Central Committee and adding new defense minister Dong Jun to the Central Military Commission — rather than the economy.

Why It Matters: Some firms and investors hope Beijing will soon use the Third Plenum to launch a significant market-oriented program to address China’s declining post-COVID growth outlook. But these expectations may be disappointed.

• Recent policy meetings suggest Xi does not share the market’s grim assessment of China’s economy and remains focused on balancing growth with security and self-reliance.

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

Learn More: Read about why it’s likely “Xi Will Adopt a More Oracular Leadership Style” this year in China 2024: What to Watch.

4. China Looks to Expand Police Presence Abroad

What Happened: Early this week, the Foreign Minister of Papua New Guinea (PNG) revealed that talks were underway for a deal under which China would provide PNG with law enforcement training, policing equipment, and surveillance technology.

Between the Lines: This is among the first of what is likely to be a wave of similar deals offered by Beijing in the coming years.

• In its 2023 concept paper detailing its newly-launched Global Security Initiative (GSI), Beijing calls for the “establishment of a global training system to train for developing countries more law enforcement officers who are responsive to their countries’ security needs.” It adds that China will support training for 5,000 security professionals from developing countries over the next several years.
• China has posted a police liaison team in Solomon Islands since 2022, providing law enforcement training, equipment and technology. China has also provided some such assistance to countries in Africa and Central Asia.

Why It Matters: Whether a China-PNG policing partnership happens or not, Beijing is set to continue expanding the operational presence of its security forces — both police and military — in developing countries via training programs, basing arrangements, and export of equipment and surveillance technologies. These efforts are part of a larger Chinese strategy to significantly expand its economic, diplomatic, and security engagement with the Global South in the coming years.

By: Bates Gill, Executive Director, Center for China Analysis

Learn More: Read about why “China Will Accelerate Its Pivot to the Global South” in China 2024: What to Watch.

5. Pentagon Adds Chinese Companies to Entity List

What Happened: On Wednesday the U.S. Department of Defense (DoD) added a dozen additional Chinese companies to its Entity List, intended to curb access to U.S. technology that may aid China's military.  

The Details: New additions to the list include memory chip maker YMTC, artificial intelligence company Megvii, lidar maker Hesai Technology, and tech company NetPosa. The DoD Entity List now includes over 60 Chinese firms that DoD has identified as supporting the Chinese military.

• Most of the firms are involved in science and technology industries, particularly microchips.
• While being placed on the list doesn't involve immediate bans, it heightens scrutiny on the companies and adds pressure on the Treasury Department to sanction the companies.

China’s View: A spokesperson for the Chinese embassy in Washington said China opposed the move and called it an abuse of state power.

• China's foreign ministry urged the United States to “immediately rectify” the “discriminatory practices” and provide Chinese firms “a fair, just and non-discriminatory environment” to operate in.

Why It Matters: The DoD Entity List is part of a larger effort initiated under the Trump administration to restrict Chinese access to U.S. technologies that may aid the Chinese military. Despite moving to try to stabilize relations with China at a diplomatic and strategic level, the Biden administration has so far quietly continued to ramp up technology restrictions.

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

Learn More: Read about how the upcoming U.S. election may further shift U.S.-China relations this year in “Two Elections Will Challenge Chinese Foreign Policy,” part of China 2024: What to Watch.