🌍 China's Two Sessions

Plus: Cocoa prices are at an all-time high

March 06, 2024

Hi Intriguer. As we reach more and more inboxes, the amount of tips, leads and on-the-ground anecdotes we get sent is increasing as well. And we love it.

Of course, we can’t publish everything we hear, but your observations really help us add nuance and colour to our analysis of world events. Please keep them coming!

Today’s top story is about China’s biggest political event – the Two Sessions (known as Lianghui – 两会). I had the good/mis fortune to attend a similar meeting in Shanghai back in 2017. While the pageantry is something to behold, I can’t recommend silently sitting through four hours of Chinese officials carefully reading aloud each word of a 200-page work report.

Luckily for you, we’ve summarised everything you need to know so far about the (still ongoing) Two Sessions – the only question is what you’ll do with the 3 hours and 57 minutes we’ve saved you.

– John Fowler, Co-Founder

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Super Tuesday results. As expected, Joe Biden and Donald Trump dominated their respective party primaries in yesterday’s ‘Super Tuesday’ vote, setting them on course to clinch their nomination in the coming weeks. Notwithstanding Nikki Haley’s surprise win over Trump in Vermont, this is looking like the least competitive US primary season in decades.

US legislators introduce TikTok bill. Lawmakers have introduced a bill that bans app stores from distributing the popular short video app unless ByteDance, TikTok’s China-based parent company, divests control. TikTok has criticised the move on free speech grounds, while also noting the platform’s role in helping US small businesses grow. Previous congressional attempts to ban the app have failed partly due to free speech concerns, which this new bill seeks to address.

Haiti PM lands in Puerto Rico. Prime Minister Ariel Henry has had to land in Puerto Rico after the main airport in Haiti was attacked by armed gangs seeking to block his return. Haiti’s crisis has spiked in the last few days, with authorities announcing a state of emergency, neighbouring Dominican Republic closing its airspace, and gangs warning of a “civil war that will lead to genocide” if Henry doesn’t resign.

Bitcoin hits new high. Bitcoin briefly touched the $69,210 mark yesterday, an all-time high for the crypto-currency, before quickly tumbling 8%. The price of Bitcoin has already climbed 45% this year, as supply tightens and new Bitcoin exchange traded funds (ETFs) start trading, but some now expect sharp downward corrections. Gold also reached an all-time high on Tuesday.

Venezuela sets election date. The country’s electoral authorities have announced the presidential election will take place on 28 July, ending months of speculation. President Nicolás Maduro, who has retained a tight grip on power for over a decade, will presumably seek re-election. Opposition figure María Corina Machado comfortably won her primary process last year but authorities have banned her from running due to allegations of financial misconduct (which she maintains are politically motivated).

TOP STORY

Two Sessions, five quotes

The Two Sessions kick off in the Great Hall of the People. Credits: Jade Gao/AFP/Getty Images.

Thousands of Communist Party members have descended on Beijing for China’s annual ‘Two Sessions’ political process this week. The ‘two sessions’ refer to the parallel meetings of two political bodies:

The National People’s Congress (NPC), which is China’s 3,000-strong rubberstamp parliament, and
The Chinese People’s Political Consultative Conference, an advisory body which holds even less sway than the NPC

These meetings are more choreographed than a 1980s workout video. But as China grapples with a messy inbox (pervasive real-estate crisis, persistent deflation, and beyond), these formalities can still offer clues into China’s thinking.

A key source of clues is the government work report that China’s premier, Li Qiang (nominally the country’s number two leader), delivers to the NPC each year. It sums up last year’s wins and sets the priorities for the year ahead.

Here are five quotes from Li Qiang’s keynote that caught our eye:

“Achieving this year’s targets will not be easy”

Li is referring in part to this year’s GDP growth target of “around 5 per cent” – the same as last year’s target. That figure is what most China watchers expected, which, said another way, is the minimum target China could set without spooking markets. It’s an attempt to pump up confidence while managing expectations.

“Insufficient demand, overcapacity in some industries, weak societal expectations and many lingering risks”

Here Li was listing reasons why “the foundation for the continuous recovery and improvement of our country’s economy is still not solid”. Many observers would likely agree with (if not add to) that list.

But the real debate isn’t about what ails China’s economy, but rather the cure. To that end, Li announced $139B in special bonds to ramp up central stimulus while taking pressure off local governments.

And yet the market’s ‘meh’ response suggests one of two things: either the market wants more stimulus, or it thinks more stimulus is simply papering over China’s more fundamental economic problems.

And that brings us back to the diagnosis: the above list arguably reflects symptoms of a much deeper malady, stemming from China’s unique economic model.

“Regional hotspot issues keep erupting. This has made China’s external environment more complex, severe, and uncertain”

Compared with last year, China is painting a less strident and more nuanced picture of the outside world.

But the question is whether this is just a tactical shift in rhetoric to calm tensions abroad and focus on problems at home, or whether China is shifting its aims.

One way to answer that is to look at whether there’s been a parallel shift in China’s actions. Sure, Presidents Xi and Biden tried to kiss and make up last year, but while Premier Li was delivering his speech yesterday, China was again firing water cannons at Philippine vessels in the South China Sea.

“We will promote the peaceful development of cross-Strait relations, be firm in advancing the cause of China’s reunification”

Last year’s report used the phrase “peaceful reunification” with Taiwan, whereas this year’s wording seems to (if you squint a bit) dial back that language a little.

But it’s important not to over-index on this stuff – it’s not the first time China has removed these words, and it probably reflects China’s irritation that Taiwan’s people voted for another independence-leaning government in January.

It could also be a way to counterbalance the more nuanced tone in Li’s other quotes; a way of saying ‘yes, we’re lowering the temperature, but that doesn’t mean we’re letting Taiwan go’.

“The armed forces will … devote great energy to training under combat conditions”

It’s always interesting to see an emphasis on “combat conditions” as a signal that China’s not playing around. But again, it’s not the first time we’ve seen this formulation.

Many commentators say this is Xi Jinping’s way of making sure Chinese generals don’t get complacent. After all, China hasn’t fought a full-scale war since its brief but bloody 1979 invasion of Vietnam. Xi has good reason to worry too, given recent reports of corrupt generals fuelling rockets with water.

INTRIGUE’S TAKE

Overall, we see no major shifts, but rather a continuation of three trends.

First, China’s opaque vibes look less like an attempt to obscure its economic plans, and more like genuine uncertainty about what its plans actually are.

Second, Premier Li’s movements this week – whether mentioning his boss’s name a record 16 times, or ending a three-decade-long tradition by not hosting a press conference this year – show that President Xi Jinping is continuing to centralise and solidify his control.

But third, there’s tension between these first two trends. If Xi can’t address China’s problems, he’ll increasingly bear the responsibility for them. And that could raise the chances of Xi facing some kind of internal challenge.

But of course, given China’s opaque system, we may never know.

Also worth noting:

We’re also watching to see if China will announce a new foreign minister. The previous foreign minister’s resignation was formally accepted last week, eight months after he disappeared from public view amidst rumours of an extramarital affair and/or being caught up with foreign intelligence agencies. His replacement Wang Yi is currently straddling two jobs in what’s widely seen as a temporary fix.
If China names a new foreign minister, speculation is it’ll very likely be the Oxford-educated Lui Jianchao, a former ambassador to Indonesia and the Philippines. Folks say he’s charming and impressive, presenting a friendlier face to a China-wary world.
The ‘Two Sessions’ formalities wrap up on 11 March.

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MEANWHILE, ELSEWHERE…

🇯🇵 Japan: Local media outlets are reporting the possibility of Japan joining the Australia-UK-US (‘AUKUS’) security tech pact, though not its nuclear-powered submarines component. There’s speculation this could be announced during Prime Minister Fumio Kishida’s visit to Washington next month.
🇺🇦 Ukraine: Ukrainian intelligence says naval drones have sunk Russia’s Sergei Kotov patrol ship in the Black Sea, killing seven. Separately, Ukraine has also claimed credit for a drone attack on an oil depot in the Russian border region of Belgorod yesterday.
🇲🇻 Maldives: The archipelago’s defence ministry says it’s ordered Indian troops to leave, and signed a ‘military assistance’ deal with China. India has long considered the Maldives part of its regional turf, but a pro-China president came to power last year on an ‘India Out’ platform.
🇵🇦 Panama: A court has annulled the candidacy of a former president, Ricardo Martinelli, in the upcoming May elections. He was the favourite to win, but has been living in the Nicaraguan embassy since a local court found him guilty of money laundering last month.
🇿🇼 Zimbabwe: The US has unveiled sanctions against Zimbabwe’s president, first lady, and close aides for corruption and their alleged involvement in “abductions, physical abuse, and unlawful killing.” Zimbabwe, one of the most heavily sanctioned countries by the US, described the move as “illegal”.

EXTRA INTRIGUE

Here’s what we’re reading on nuclear power

CHART OF THE DAY

Credits: The Economist.

Chocolate lovers, we’ve got some bad news: the price of cocoa, the key ingredient in chocolate, has doubled since 2022 and is showing no signs of slowing. Unseasonable weather patterns and crop-killing diseases have hit yields in the West African countries that produce 60% of the world’s cocoa.

Not to toot our own horn or anything, but we called this in our 2024 Predictions special edition. 💅

DAILY POLL

Do you think China's economy will recover its mojo this year?

Yesterday’s poll: Do you think the leak will impact Germany's calculus on whether or not to send Taurus missiles to Ukraine?

🟨🟨🟨🟨⬜️⬜️ ⛓️ Yes, the frenzied public reaction rules out any Taurus delivery for now (25%)

🟨🟨🟨🟨🟨⬜️ 🤝 Yes, Berlin will double down on its support for Ukraine longer term (26%)

🟩🟩🟩🟩🟩🟩 🤷 No, it'll make no real difference (29%)

🟨🟨🟨🟨⬜️⬜️ ✍️ Other (write in!) (20%)

Your two cents:

⛓️ H: “Public opinion in Germany is already divided over that topic. This just adds to the political constipation!”
🤷 G.C: “The leak won't really impact whatever decision is made, but the leak will be used as part of whatever explanation is offered for that decision.”
✍️ A.Z: “Realistically, it will take the German government ages to figure out whether and how to react, so it won‘t change much…”
✍️ K.L: “Scholz is in an incredibly precarious position: His coalition basically only exists because all three parties wanted a government without the CDU after 16 years. This leak is another example that Scholz does not have his security apparatus under control. But the man is stubborn, so he will likely try to remain firm on Taurus, but his unstable government might force his hand.”

PS – We thought y’all might be interested to know this was our biggest ever poll response. Almost evenly split, too! 😯

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