UPDATED: Ballooning crisis: China punches back at U.S. surveillance “smear”

What’s next in U.S.-China relations.

Feb 16, 2023 View in browser   By Phelim Kine Sailors assigned to Assault Craft Unit 4 prepare material recovered in the Atlantic Ocean from a high-altitude balloon for transport to federal agents at Joint Expeditionary Base Little Creek Feb. 10, 2023. | NORAD/NORTHCOM Hi, China Watchers. This week we parse Beijing’s efforts to flip the narrative of its spy balloon exposure scandal; update on Biden’s China-countering South Pacific diplomatic push and scrutinize the Chinese government’s stern diagnosis of America’s illegal narcotics problem. And in the wake of President Joe Biden’s bonding session with Brazil’s President Luiz Inacio Lula da Silva last week, we profile a book that argues China is playing for keeps in its influence campaign in Latin America. Let’s get to it. — Phelim As U.S. outrage continues over the intrusion and subsequent destruction of a Chinese spy balloon in U.S. airspace earlier this month, Beijing has decided the best defense is a good offense. Gone are Beijing’s initial expressions of “regrets” for the incident (in a statement that also claimed the airship was for meteorological purposes). Instead, the Chinese Foreign Ministry is in full-throated counterattack mode insisting that China is the victim of what Chinese Foreign Ministry spokesperson WANG WENBIN declared on Monday were “made-up stories and smears against China.” Beijing is peddling that victim narrative to parry U.S. congressional anger which produced a bipartisan resolution on Thursday condemning the incursion as a “brazen violation of U.S. sovereignty.” The Commerce Department piled on by sanctioning six Chinese firms implicated in surveillance balloon production. Senate Majority Leader CHUCK SCHUMER captured the Capitol Hill zeitgeist by declaring on Sunday that the balloon’s exposure and destruction had “humiliated” Beijing. The Chinese government is also concerned about intensifying international concern about its spy balloon surveillance program, which the Biden administration has said spans 40 countries across five continents. Beijing’s apparent strategy: condemn, confound and contradict demands for transparency and accountability until the news cycle moves on. “This is more gaslighting by the Chinese government, trying to deflect attention away from the consequences of their blunder,” said HEATHER MCMAHON, a former senior director at the President's Intelligence Advisory Board. The Chinese Foreign Ministry kicked off its counter-narrative on Monday when  Wang, the spokesperson, described the U.S. air force downing of the spy balloon as “a trigger-happy overreaction.” Wang then berated the U.S. as “the No.1 surveillance country” with “the largest spy network in the world.” Wang salted that slam by alleging that the U.S. was itself guilty of flying high-altitude balloons above China “over 10 times without authorization” in the past year alone. That evoked a flat denial by the Biden administration. “We do not send spy balloons over China, period,” Secretary of State ANTONY BLINKEN told NPR on Tuesday. Wang followed up on Tuesday by re-upping his allegation of U.S. spy balloon incursions over China and demanding that the Biden administration “give China an explanation” for doing so. Wang went wider and deeper by criticizing alleged international spying activities by the NSA and the CIA dating back to the 1970s and urged foreign media to “look harder into… U.S. eavesdropping and spying activities.” Wang also alluded to the U.S. air force’s downing of three unidentified objects in North American airspace on Friday, Saturday and Sunday respectively by accusing the U.S. of “shooting mosquitoes with flak guns.” Wang ratcheted up the invective on Wednesday by condemning the Commerce Department’s sanctions of balloon-related Chinese firms as “illegal” and threatening unspecified “countermeasures…to firmly safeguard China’s sovereignty.” Wang warned that the dispute over the balloon had inflicted “grave impact” on President JOE BIDEN’s and Chinese paramount leader XI JINPING’s efforts to stabilize bilateral ties at their meeting in Bali in November. The Biden administration is more sanguine about the furor’s potential longer-term impact on U.S.-China relations. When asked by POLITICO in a phone interview on Tuesday whether the dispute will have a lasting impact on bilateral ties, Vice President KAMALA HARRIS responded, “I don’t think so, no.” Secretary of State Blinken and China’s top diplomat, WANG YI, may have a chance to deflate some of the balloon rhetoric at a possible meeting on the sidelines of the three-day Munich Security Conference opening Friday, Bloomberg reported on Monday. Neither side has confirmed the meeting, but if it occurs it’s unlikely to render any breakthroughs. “We see this pattern in U.S.-China relations every couple of years – there's a crisis, we get to a deadlock and then we have to let tensions run their course for both sides to agree that the atmosphere has ripened for a bit of a thaw and then they meet and try to de-escalate,” said ALEXANDER GRAY, former chief of staff of the National Security Council in the Trump administration. But Gray warned that it’s likely too early for either side to dial down their mutual hostility settings. “The bipartisan voices that we're hearing [on China] in the U.S. are not conducive to a breakthrough two weeks or three weeks after this [balloon incident] happened.” Biden ramps up U.S.-China South Pacific influence duel  The Biden administration took a decisive step to counter China’s growing diplomatic and economic heft in the South Pacific by launching negotiations for a Defense Cooperation Agreement with Papua New Guinea last week. The proposed DCA aims to “increase stability and security in the region,” the State Department said in a statement on Saturday. That’s code for a Biden administration effort to reassert U.S. power and influence in a region where China has growing sway through trade ties and infrastructure investment. And it suggests a direct administration response to Beijing’s move last year to secure a security pact with Solomon Islands despite strong objections from the U.S., Australia, Japan and New Zealand. The Solomon Islands’ security pact “is one more reason why the U.S. needs to hustle to be seen as having some kind of a greater defense presence in the region,” said CATHERINE EBERT-GRAY, former U.S. ambassador to Papua New Guinea, The Solomon Islands and Vanuatu. The DCA talks mark an administration response to Papua New Guinea’s formal request several years ago “that the U.S. have a [military] presence on the ground,” Ebert-Gray said.  The Biden administration’s efforts to draw Papua New Guinea into a formal defense treaty align with the administration’s Pacific Partnership Strategy unveiled at the first-ever U.S.-Pacific Island Country Summit in September. That strategy involved an $810 million commitment to deepen engagement with Pacific Island countries backed by benchmarks to track the strategy’s rollout. The administration also inked a memorandum of understanding last week with Micronesia “on levels and types of future U.S. assistance” to the Pacific Island country, a State Department statement said. That's a key step in renewing a strategic agreement with Micronesia. Micronesia, Palau and Marshall Islands are all negotiating the renewals of those agreements — that give the U.S. the right to deny outsider access to those countries’ water, airspace and land. The treaties in turn obligate the U.S. to provide the three countries a host of government services, financial assistance and rights of visa-free migration. Palau and Marshall islands signed similar MOUs last month. Beijing is watching. On Wednesday China’s Foreign Affairs Ministry announced the appointment of China’s former ambassador to Fiji, QIAN BO, as China’s new special envoy for Pacific Island Countries affairs. Qian will work full-time to “advance further development” of ties between China and Pacific Island countries, the Chinese Foreign Ministry’s Wang said on Wednesday. Qian’s appointment highlights the fierce U.S.-China influence competition in the region. U.S. engagement in the region “can’t just be military,” said JOHN T. HENNESSEY-NILAND, former U.S. ambassador to Palau and now professor of practice at the Bush School of Government at Texas A&M University. “The military is important, but the concerns in the region are also economic, capacity building, climate change and are as important as a potential [military] threat from the PFRC.” TRANSLATING WASHINGTON —LAWMAKERS TARGET HONG KONG REPRESENTATIVE OFFICES: First in China Watcher: Sens. MARCO RUBIO (R-Fla) and JEFF MERKLEY (D-Ore.) are reintroducing a bill today to strip the Hong Kong government’s official outposts in the U.S. of their quasi-diplomatic status. The Hong Kong Economic and Trade Office Certification Act will terminate that status if the Biden administration determines that Hong Kong “no longer enjoys a high degree of autonomy” from Beijing. Rep. JIM MCGOVERN (D-Mass.) and Rep. CHRIS SMITH (R-N.J.) will introduce a companion bill in the House on Friday. “As China continues to undermine Hong Kong’s democracy and autonomy, we must ensure that if Hong Kong Economic and Trade Offices no longer merit diplomatic immunities, their privileges are revoked,” Rubio said in a statement. HKETO didn’t respond to a request for comment. —NSC CHINA CHIEF ROSENBERGER BOWS OUT:   Senior NSC China director LAURA ROSENBERGER is heading to the exit in what’s described as a long planned White House departure after two years in the hot seat, Bloomberg reported on Wednesday. Rosenberg memorably declared in 2020 that China had gone “full Russian” with its disclosures—or lack thereof—about Covid-19 and wrote a piece about how online information is the latest front in the “Great Power” competition. SARAH BERAN, deputy executive secretary at the State Department’s Executive Secretariat, will transfer to the NSC as Rosenberger’s successor. —NIKKI HALEY PITCHES CHINA HAWK PRESIDENCY: Former Ambassador to the United Nations NIKKI HALEY announced on Tuesday she’ll challenge DONALD TRUMP as the GOP presidential nominee in 2024. Haley signaled a tough-on-China campaign platform by including a reference to alleged genocide against Muslium Uyghurs and a warning that “China and Russia are on the march – they all think we can be bullied” in a tweeted announcement. Haley’s China hawk credentials include her declaration that “the thing that keeps me up at night is China” in an interview in 2021. —STATE SLAMS ALLEGED CHINESE LASER ATTACK : A Chinese Coast Guard vessel’s use of a reported “military grade” laser to temporarily blind crew members of a Philippine Coast Guard vessel was “provocative and unsafe,” the State Department said in a statement on Monday. The incident occurred in contested waters in the South China Sea on Feb. 6 as the Philippine vessel was en route to resupply a military outpost. Wang at the Chinese Foreign Ministry said the Chinese Coast Guard vessel behaved in “a professional and restrained way.” Philippine President FERDINAND MARCOS JR. called in the Chinese ambassador on Tuesday to protest what Marcos called the “increasing frequency and intensity” of aggressive actions by Chinese naval units in the South China Sea. Hot from the China Watchersphere Beijing’s stonewalling of a World Health Organization effort to launch a second probe into the origins of Covid has prompted the organization to abandon the effort. | Ng Han Guan/AP Photo  —BEIJING BLOCKAGE ABORTS WHO COVID PROBE: Beijing’s stonewalling of a World Health Organization effort to launch a second probe into the origins of Covid has prompted the organization to abandon the effort. “The politics across the world of this really hampered progress on understanding the origins,” WHO epidemiologist MARIA VAN KERKHOVE told Nature magazine in a story published on Tuesday. Beijing hampered an initial WHO investigation into Covid origins in January 2021 and opposed a follow-up probe proposed later that year by WHO head TEDROS ADHANOM GHEBREYESUS. The Foreign Ministry’s Wang responded on Wednesday by repeating a  conspiracy theory that Covid emerged from “U.S. bio-military bases at Fort Detrick and around the world.” —XINJIANG OFFICIAL POSTPONES EUROPEAN TOUR: The Chinese Communist Party’s deputy secretary for Xinjiang, ERKIN TUNIYAZ, has “postponed” a planned trip to London, Brussels and Paris, the South China Morning Post reported on Tuesday. Tuniyaz’s travel plans fueled an uproar from human rights activists due to his role in what the United Nations has warned may be crimes against humanity in Xinjiang. Wang at the Foreign Ministry called those allegations “the lie of the century propagated by anti-China forces.” —JAPAN, PHILIPPINES DEEPEN DEFENSE TIES: Philippine President Marcos and Japanese Prime Minister FUMIO KISHIDA nodded to mutual perceptions of a growing Chinese military threat in the region by inking an agreement last week deepening bilateral defense ties. The deal allows joint military exercises by Philippine and Japanese troops aimed to counter what Marcos described as the “rough waters buffeting our region.”  TRANSLATING CHINA Synthetic precursor chemicals produced in China and shipped to Mexican cartels that process it into fentanyl-like synthetic opioids are killing tens of thousands of Americans every year. | U.S. Attorneys Office for Utah via AP, File —FOREIGN MINISTRY GOES OFF ON DRUGS: Beijing gambled this past week that needling the Biden administration on America’s drug problems might provide a useful distraction from the spy balloon debacle. That gambit also served to remind the Biden administration that it needs China’s help to address the U.S. opioid overdose epidemic. (Synthetic precursor chemicals produced in China and shipped to Mexican cartels that process it into fentanyl-like synthetic opioids are killing tens of thousands of Americans every year. Adding insult to injury, Beijing suspended counternarcotics cooperation in August in reprisal for then-House Speaker NANCY PELOSI’s Taiwan trip.) China’s Foreign Ministry signaled via a 2,600-word screed published last week titled “Drug Abuse in the United States” that Beijing has no plans to stop that chemical flow. The Foreign Ministry document gives “fentanyl” and “opioids” one mention each, and omits any reference to Chinese precursors. The document instead blames drug addiction in the U.S. on a uniquely American “social malaise” powered by the legal cannabis industry, the 1960s “hippie movement” and a permissive culture in which people“take drugs for relief or leisure.” Chinese state media tabloid Global Times amplified the message in a story on Wednesday that it promoted on Twitter with the hashtag “#USinChaos. U.S. lawmakers working to address the opioid overdose epidemic are unimpressed. “Missives like this that seek to shift blame are simply a distraction,” said Rep. DAVID TRONE (D-Md.), co-chair of Biden’s Commission on Combating Synthetic Opioid Trafficking. “U.S. demand is not the only factor contributing to the crisis – it is widely known that most illicit synthetic opioids in the U.S. were manufactured by Mexican cartels, using chemicals produced in China.” Trone wants Beijing to impose and enforce rules requiring Chinese chemical firms to identify buyers of precursor chemicals and adopt strict labeling requirements of export-bound chemicals. The Foreign Ministry’s deaf ear to those concerns is causing tempers to flare on Capitol Hill. Senate Foreign Relations Committee Chair BOB MENENDEZ (D-N.J.) and ranking member JIM RISCH (R-Idaho) called on the Biden administration to impose sanctions on China if it doesn’t crack down on the chemical industry that feeds the fentanyl trade, POLITICO’s CARMEN PAUN reported on Wednesday. During a hearing on the fentanyl trade, the bipartisan duo also called out Mexico for not doing enough to curtail the drug’s trafficking. “I doubt [Chinese paramount leader] Xi Jinping cares about his chemical and pharmaceutical industries supplying the Mexican cartels that are flooding the United States with fentanyl, but let’s be clear: His government’s negligence is helping unleash a deadly wave of fentanyl-related. HEADLINES Foreign Affairs: What China Has Learned From the Ukraine War BBC: Grieving a daughter's Covid death in Wuhan - while being surveilled Foreign Policy: China’s Surveillance Balloon Is Not a Test of Will HEADS UP  —CHINA COMMITTEE MULLS “INFURIATING” TAIWAN TRIP: The House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party is hatching a Taiwan trip plan. "We know that will infuriate the Chinese. But I think it's incredibly important for us to do that, because you have to send the signal that we're strongly on the side of Taiwan,” committee member Rep. ROB WITTMAN (R-Va.) told Nikkei-Asia in an interview published on Sunday. Wittman’s press officer referred China Watcher to the China Committee for comment. Committee chairman MIKE GALLAGHER (R-Wis.) “would like to lead a trip to Taiwan but has no formal plans to do so at the moment,” said a committee staffer unauthorized to speak on the record. One Book, Three Questions The cover of the book "The New Cold War, China, and the Caribbean" is shown. | Alex Linch / shutterstock.com The Book: The New Cold War, China, and the Caribbean: Economic Statecraft, China and Strategic Realignments The Author:  SCOTT B. MACDONALD is the chief economist for Smith's Research & Gradings and a Caribbean Policy Consortium Fellow. Responses have been edited for length and clarity. What is the most important takeaway from your book? In the early 21st century China made a sustained push into the Caribbean. The objectives: natural resources, overseas jobs for Chinese workers, and to reduce the number of countries that still diplomatically recognize Taiwan. It was also an asymmetrical geopolitical poke at the U.S. and to garner goodwill and votes of a large number of countries in international forums at relatively low cost. The U.S. was previously the dominant regional political power; two decades later China has emerged with enough clout to make the U.S. refocus on the region and commit resources.  What was the most surprising thing you learned while researching and writing this book? The extent of Chinese penetration and engagement in the Caribbean through economic statecraft, including support for badly needed and long-desired infrastructure projects. Between 2005 and 2020 alone, China invested over $8 billion in six Caribbean countries in sectors including tourism, transportation and agriculture. What does your book tell us about the trajectory and future of U.S.-China relations? China’s gains in the Caribbean, its staying power as a partner for a number of regional countries and the harder line out of Beijing in the aftermath of last year’s 20th Party Congress indicate that Sino-American rivalry for the hearts and minds of the people of Latin America is going to be more intense going forward.  Got a book to recommend? Tell me about it at pkine@politico.com. Thanks to: Mike Zapler, Heidi Vogt, Eugene Daniels, Alex Burns, Carmen Paun, Matt Kaminski and digital producer Sinobia Aiden. Do you have tips? Chinese-language stories we might have missed? Would you like to contribute to China Watcher or comment on this week's items? Email us at chinawatcher@politico.com. An earlier edition of this newsletter misspelled Scott B. MacDonald's name.   Follow us

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