China Policy Monitor No. 1559

YELLEN GETS WARM RECEPTION IN BEIJING
U.S. Treasury Secretary Janet Yellen received a warm reception during her recent visit to Beijing. China's Vice Premier, He Lifeng, described bilateral discussions as "constructive," and signaled willingness to continue economic deliberations. At the forefront of these conversations was the Biden administration's review of outbound investment regulations that could curtail U.S. economic engagement with Chinese companies. During her trip, Yellen offered reassurances that any regulations would be "transparent" and "very narrowly targeted." She also shared publicly that President Biden does not view the U.S. and China "through the frame of great power conflict." (CNBC, July 9, 2023)

WITH AN EYE ON UKRAINE, PLA ADJUSTS TRAINING
Beijing has begun previewing the lessons learned from Russia's ongoing war on Ukraine. In a recently aired exercise on CCTV, the People's Liberation Army (PLA) conducted a wargame that pitted reconnaissance drones and radars against an adversary's portable anti-aircraft and anti-tank missiles. According to Chinese defense experts quoted during the broadcast, the PLA is watching Russia's use of drone warfare closely, particularly the ability of unmanned aerial vehicles to spot anti-tank threats and suicide air strikes. (South China Morning Post, July 3, 2023)

CHINA DEEPENS ITS STAKE IN SAUDI ARABIA
Festering tensions between Washington and key Middle Eastern governments over the past two years are rebounding to Beijing's benefit. Investment deals between Chinese firms and Saudi investors are increasing in multiple sectors, including energy and technology. More broadly, Riyadh appears poised to increase the share of investments in Chinese firms in its sovereign wealth fund. This trend reflects China's growing diplomatic clout in the region, particularly following its recent brokering of a diplomatic breakthrough between Saudi Arabia and Iran. However, it also affords Chinese companies greater flexibility in alleviating the impact of Western economic sanctions. For instance, SenseTime, a Chinese firm that has been sanctioned by the U.S. for human rights violations relating to its role in aiding Beijing's clampdown on China's Uighur minority, is actively working with partners in Saudi Arabia on smart city projects. (Wall Street Journal, July 7, 2023)

HONG KONG TESTS EXTRATERRITORIALITY OF NATIONAL SECURITY LAW
Authorities in Hong Kong are leveraging the city's national security law to target democracy activists and key protest leaders. Law enforcement has placed bounties on the heads of Nathan Law and seven other individuals valued at 1 million Hong Kong dollars apiece ($127,656). Complicating the effort to prosecute these individuals, of course, is their presence on foreign soil, specifically the United States, Britain, and Australia. Hong Kong's use of the national security law is partially a signaling mechanism to the city’s current residents, but it also dovetails with increased reports of China engaging in transnational repression – leveraging family connections in China to silence dissidents abroad. (NBC News, July 3, 2023)

BEIJING PROMISES MORE ASSISTANCE TO THE SOLOMONS
China and the Solomon Islands recently signed nine new bilateral agreements, deepening their relationship on issues like law enforcement training. Beijing also agreed to build the sports stadium for this year’s Pacific Games, which Honiara is hosting. Meanwhile, Solomon Islands Prime Minister Manasseh Sogavare was in Beijing opening an official embassy for the Solomon Islands to the PRC. These developments follow a highly publicized defense agreement last year that afforded port access for the People's Liberation Army (PLA) in the South Pacific. Historically, Australia has been Honiara's main security partner, and officials in Canberra have taken notice of China's growing influence over the island nation. In an effort to balance Beijing, Australia's defense minister, Richard Marles, proffered a $25 million assistance package ahead Honiara's upcoming elections next year. (Australia Broadcast Corporation, July 10, 2023)