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THIS WEEK:

Xi emphasizes innovation in the global sci-tech battlefield, financial reform announcements at 2024 Lujiazui Forum, China eyes new Russia–North Korea pact, rainstorm red alert in southern China, and Chang’e-6 returns and ups the ante in U.S.-China space race.

1. Xi Emphasizes Innovation in the Global Sci-Tech Battlefield

What Happened: On Monday, President Xi presented China’s top science and technology award and delivered a speech at a joint session that included the National Science and Technology Conference, the National Science and Technology Award Conference, and the general assemblies of the Chinese Academy of Sciences and the Chinese Academy of Engineering.

Greater Innovation, Resource Allocation: Xi emphasized the need for greater innovation, stating that “a robust science and technology sector is the cornerstone of a strong nation.” He highlighted the importance of maximizing the market’s decisive role in allocating technology resources via the “new nationwide system” while enhancing government functions, and he urged the integration of technological and industrial innovation to foster the development of “new quality productive forces.”

“Seize the Commanding Heights in Sci-Tech Competition”: President Xi stated that the “technological revolution is intertwined with the superpower rivalry, and the high-tech sector has become the main battlefield.” He has urged Chinese researchers to accelerate innovation and achieve breakthroughs in “bottleneck” technologies to “seize the commanding heights in sci-tech competition and future development.”

Why It Matters: Amid Beijing’s tech war with the West, particularly a United States that has blocked the sale of advanced semiconductors and related technology, President Xi has emphasized the importance of technological self-reliance and innovation. Advanced chips are crucial for artificial intelligence development, which is deemed a transformative force in the development of industries, services, and the military. As the battle for tech supremacy intensifies, Xi continues to stress the need for China to achieve technological independence to drive long-term economic growth and potentially play a leading role in global sci-tech governance.

By Yifan Zhang, Affiliated Researcher, Center for China Analysis

Learn More: CCA Affiliated Researcher Qiheng Chen took stock of developments in China's domestic governance of AI and analyzed uncertainties surrounding Beijing's regulatory approach.

2. Financial Reform Announcements at 2024 Lujiazui Forum

What Happened: At the 2024 Lujiazui Forum in Shanghai, People’s Bank of China (PBOC) governor Pan Gongsheng and China Securities Regulatory Commission (CSRC) chairman Wu Qing announced sweeping reforms aimed at overhauling China’s financial sector.

Revamping China’s Financial System: The CSRC introduced eight measures to revamp the STAR Market, China’s tech-focused stock exchange, including adjusting IPO pricing, supporting mergers, enhancing R&D fundraising, and introducing new financial products. Governor Pan proposed significant shifts in monetary policy, including potential government bond trading in the secondary market, and suggested moving to a single short-term rate to guide markets. Additionally, the CSRC reaffirmed its commitment to opening China’s financial sector to foreign investors, promising greater access and a more level playing field.

Challenges Ahead: The STAR Market has struggled with performance and investor interest, raising doubts about the effectiveness of these new reforms. Despite the PBOC’s plan to expand its toolbox, the shift to trading government bonds will be gradual, and it must fine-tune its tools to navigate complex monetary conditions and ensure financial stability. Geopolitical tensions, regulatory uncertainties, and economic slowdowns have left foreign investors cautious and questioning the potential for a quick turnaround.

Why It Matters: The Lujiazui Forum is the prime stage for announcing China’s financial reforms. Ahead of the Third Plenum, Beijing is signaling its commitment to a structural overhaul of its financial system and monetary policy; however, restoring investor confidence hinges on effective implementation.

By Lizzi C. Lee, Fellow on Chinese Economy, Center for China Analysis

Learn More: Read more about what this all means for the upcoming Third Plenum by Lizzi in the Diplomat. 

3. China Eyes New Russia–North Korea Pact

What Happened: For the first time in 24 years, Russian president Vladimir Putin visited North Korea (DPRK) and met with its leader, Kim Jong Un.

Cause for Clause: On June 19, the two leaders signed 23 articles, covering military, economic, diplomatic, and cultural exchange as well as a treaty upgrading the Russia-DPRK relationship to a “comprehensive strategic partnership.” The treaty is regarded as a mutual defense treaty, obliging both countries to militarily intervene if either is attacked. A clause in the agreement invoked language from a 1961 treaty that pledges mutual aid if either country faces “aggression.”

China’s Response: The response by China’s Ministry of Foreign Affairs was markedly quiet. The ministry said it “would not comment on the bilateral cooperation between the DPRK and Russia.” The ministry only repeated its principles on the “Korean Peninsula issue,” saying that “we always believe that upholding peace and stability on the peninsula and advancing the political settlement of the peninsula issue serve the common interests of all parties.” 

Why It Matters: China’s muted response to the meeting is notable and may suggest uncertainty over the implications for China’s strategic interests. In return for needed munitions supplied by North Korea for Russia’s war in Ukraine, Moscow has provided economic assistance and technology transfers to North Korea, potentially amplifying the threat from Kim’s nuclear weapons and missile program. The summit came as the United States and its allies express growing concerns over a possible arms arrangement that would deepen military ties between Moscow and Pyongyang.

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

Learn More: ASPI hosted an expert panel moderated by ASPI Managing Director Rorry Daniels that discussed the summit meeting between Putin and Kim.

4. Rainstorm Red Alert in Southern China

What’s Happening: Southern China continues to experience unusually heavy precipitation, triggering flash floods and mudslides.

Rapid Response: On Monday, China’s National Meteorological Center renewed a red alert for rainstorms; in response, the State Flood Control and Drought Relief Headquarters raised the emergency response level to three (out of four) in the eastern provinces of Zhejiang, Anhui, and Jiangxi. On Tuesday, President Xi called for all-out efforts to safeguard lives and property, noting that controlling the floods is becoming increasingly arduous.

Grim Details: The rain’s intensity has caused significant infrastructure damage across southern China. Preliminary estimates place damages at $650 million and counting. In addition to direct economic losses, at least 60 people have lost their lives, with 47 deaths in Guangdong Province alone.

Why It Matters: As the impacts of climate change continue to be felt, extreme weather events like those in southern China will increase in prevalence and intensity. China’s coordination of local relief and prevention efforts is indicative of the astute awareness needed to adapt to and combat climate change at the domestic level.

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

Learn More: Taylah explains why "China Will Accelerate Climate Resilience as a Security Priority" in CCA’s flagship annual report, China 2024: What to Watch.

5. Chang’e-6 Returns and Ups the Ante in U.S.-China Space Race

What Happened: On Tuesday, China’s Chang’e-6 lunar lander successfully returned from the dark side of the Moon.

To the Moon and Back: The Chang’e-6 module parachuted into Inner Mongolia at the end of its 53-day mission carrying the first-ever lunar samples from the Moon’s far side, a major achievement for the China National Space Administration (CNSA). President Xi called the command center to congratulate the mission team on their “remarkable achievements that have attracted worldwide attention” and expressed hope that other agencies would “strengthen international exchanges and cooperation” with CNSA.

Lunar Iron Curtain: In April, CNSA published a new strategic lunar plan wherein it, for the first time, referred to the United States as a competitor in outer space. Both countries have plans to build a lunar base in the next decade “on the same historical stage and at the same geographical location (the south pole of the Moon).” The 1967 Outer Space Treaty, to which both China and the United States are signatories, precludes nations from making sovereign claims in space but does not account for two countries trying to build a base in the same location.

Why It Matters: Chang’e-7 and Chang’e-8 are scheduled for 2026 and 2028, respectively, to search for water ice. CNSA continues to meet its goals and is on track to send astronauts to the Moon by 2030 and build an operational lunar base by 2035. This stands in contrast to the continued delays in NASA’s Artemis program, which had initially planned to send astronauts to the Moon’s south pole this year but has delayed the mission to 2026.

By Ian Lane Smith, Research Associate, Center for China Analysis

Learn More: For another arena of U.S.-China technological competition, check out the third session in CCA’s webinar series, U.S.-China Generative AI Competition.