SinoInsight 1
Chinese foreign ministry spokesperson Lu Kang said during a regular press briefing on June 20 that China had recently hosted a Taliban delegation to “promote peace and reconciliation in Afghanistan.” Lu revealed that the delegation consisted of Qatar Taliban representative Abdul Ghani Baradar and his colleagues.
The Chinese communist regime had previously invited the Taliban to China for talks on multiple occasions, but visits, if any, were not officially announced. Lu Kang’s June 20 press conference is the first time that the Chinese regime had confirmed a visit by the Taliban.
OUR TAKE
1. The Taliban are a militant, radical Islamic organization that actively engages in terrorist activities. For the Chinese regime to allow a Taliban delegation into China for talks and publicly announce the delegation’s visit is akin to legitimizing the Taliban and what the organization stands for.
2. We noted in our June 6 analysis that the CCP could utilize “conventional and ‘unrestricted warfare’ strategies and tactics” against America to survive the “new cold war.” One possible strategy is the engineering of “foreign crises to divert America’s attention away from China,” including working with regimes like Russia, Iran, and North Korea.
To divert U.S. attention, the CCP could conceivably play the “terrorism” card by cooperating with organizations that actively engage in terrorism like the Taliban. We believe that it is not beyond the CCP to “buy over” the Taliban and encourage it to create trouble for the United States in Afghanistan.
3. Playing the terrorism card would be an act of desperation for the CCP.
First, the CCP would be signaling that the Chinese regime lacks countermeasures other than “state terrorism” to cope with the Sino-U.S. trade war and escalation of bilateral tensions.
Second, the CCP would be undermining its own public reasons for persecuting the Uyghur ethnic minorities in Xinjiang. On the one hand, the CCP argues that it is suppressing “terrorism” in Xinjiang and “de-radicalizing” the Muslim Uyghurs. On the other hand, the Chinese regime openly meets with delegates of an organization infamous for carrying out acts of terror.
Third, the Chinese regime would likely find it very costly and cost inefficient to support regimes and organizations that could create incidents to divert U.S. attention. There is also a limit to what the regimes and organizations could do; Russia, Iran, North Korea, and the Taliban would unlikely risk open confrontation with the U.S. and incur U.S. military action to defend the CCP’s interests.
Finally, the Trump administration might simply not take the bait. President Donald Trump’s decision to not retaliate against Iran militarily for shooting down a U.S. drone suggests that he will not be easily dragged into unnecessary conflict with hostile forces. Also, there is a possibility that the U.S. is suspicious of the CCP’s strategic intentions and would prioritize confronting the CCP over being bogged down in proxy skirmishes.
SinoInsight 2
China’s fixed-asset investment data for January to May fell in several industries, including wholesale and retail (-23.3 percent YoY), accommodation and catering (8.3 percent YoY), as well as residential services, repairs, and other services (-10.7 percent YoY), according to data recently released by China’s National Bureau of Statistics.
OUR TAKE
1. The three industries listed above employ the bulk of people from low-income groups in China. In other words, the decline of fixed-asset investment in the three industries hints at a worsening of the unemployment situation on the mainland.
It should be noted that the NBS ceased publishing raw data on fixed-asset investment in 2018. This means that the data recently released by the NBS has already been embellished.
2. A review of NBS data over the past two years suggests that sharp declines in fixed-asset investment in wholesale and retail, accommodation and catering, as well as residential services, repairs, and other services coincided with the beginning of the Sino-U.S. trade war in 2018.
Fixed-asset investment in wholesale and retail was -6.3 percent YoY (1.654 trillion yuan) in 2017, -21.5 percent YoY in 2018, and -23.3 percent YoY in January-May 2019. Declines in 2018 were significant, and even more so in the first five months of this year.
Fixed-asset investment in accommodation and catering was up 3.9 percent YoY (610.7 billion yuan) in 2017, -3.4 percent YoY in 2018, and -8.3 percent YoY in the first five months of 2019. The growth in 2017 can be explained by the food culture in China, but the increasing drops in 2018 and 2019 reflect serious economic problems.
Fixed-asset investment in residential services, repairs, and other services showed weak growth in 2017 (268.6 billion yuan, or up 2.4 percent YoY), declines in 2018 (-14.4 percent), and continued contraction in January-May 2019 (-10.7 percent YoY).
3. In 2017, the wholesale and retail employed 141 million people, the accommodation and catering industry employed 30 million, and the residential services, repairs, and other services industry employed 21 million, according to data from China’s Ministry of Commerce. The three industries combined employment was 165 million people, or 21.3 percent of the national employment of 776 million.
Of the three industries, wholesale and retail accounted for the most employment (85 percent) and had the largest fixed-asset investment (65 percent). Yet the industry also suffered the most serious contraction in recent years.
Given recent declines in fixed-asset investment in the three industries, unemployment could be conservatively estimated at 20 percent, or about 33 million people.
4. The Chinese authorities continue to promote entrepreneurship, innovation, and the Internet economy in recent months. Still, the authorities will find it difficult to find jobs for the unemployed people in the lower income bracket. On top of that, the authorities have to find employment for the glut of graduates entering the workforce in the past three years.
The Sino-U.S. trade war is bound to worsen China’s unemployment woes. Unless the Chinese regime quickly finds a solution to the trade war, it would soon find its legitimacy imperiled by the worsening unemployment problem on the mainland.
