China Policy Monitor No. 1560

CHINA'S ECONOMIC SLUMP CONTINUES 
Economic data for the month of June has laid bare a struggling Chinese economy. Even with COVID-19 lockdowns now in the rearview mirror, key indicators suggest an economic slump as the world's second largest economy struggles to regain its footing. Most notably, China's exports in June fell 12.4% from a year prior. Housing prices were unchanged, signaling ongoing bad news for China's housing market. China's central bank reduced the amount of cash that banks must keep on hand in an effort to incentivize economic activity, but Chinese households appear to be prioritizing saving and paying off debt. (Reuters, July 16, 2023) 

THE HOLY SEE BOWS TO BEIJING, APPROVES NEW BISHOP 
On July 15th, the Vatican backed down in a months-long diplomatic dispute with Beijing and approved a new bishop in the Shanghai diocese. At issue was compliance with a bilateral accord between Beijing and the Holy See, which calls for both parties to consult one another on the naming of bishops. An additional layer of complexity was the bishop himself. Joseph Shen Bin, who previously served in a diocese in Jiangsu, is president of the Council of Chinese Bishops. The Vatican does not recognize this organization, and Reuters has reported that it is controlled by the Communist Party of China (CPC). Even so, Pope Francis decided to approve Shen "for the greater good," according to the Vatican secretary of state. (Reuters, July 15, 2023) 

BEIJING DOUBLES DOWN ON PAKISTANI NUCLEAR ENERGY 
In mid-July, senior Chinese and Pakistani politicians broke ground on a new Beijing-funded nuclear power plant in Chasma, roughly three hours southwest of Islamabad. China has aided the development of nuclear energy in Pakistan for three decades, and the new plant, dubbed Chashma-5, centers around China's latest nuclear reactor technology. Pakistan estimates Chashma-5 will contribute 1,200 megawatts of electricity daily to the national power grid, and expects the project will cost at least $3.5 billion. 

More broadly, economic relations between Beijing and Islamabad remain complicated. The China-Pakistan Economic Corridor (CPEC), the crown jewel of Beijing's Belt and Road Initiative (BRI), remains riddled with debt sustainability issues. Chinese loans represent nearly 30% of Pakistan's external debt. (Voice of America, July 14, 2023) 

CHINESE HACKERS TARGET U.S. OFFICIALS 
Around the time of Secretary of State Antony Blinken's trip to Beijing in June, Chinese hackers gained access to the Microsoft accounts of several government offices and agencies, including the email account of Secretary of Commerce Gina Raimondo. The U.S. government discovered the intrusion in June, but news of the hack broke in July. According to the Washington Post, Raimondo was the only cabinet secretary to be targeted. The focus on the commerce secretary's personal information comes not only as the Biden administration weighs additional export controls on U.S. investment in China, but also as Raimondo herself prepares to travel to Beijing. (Washington Post, July 12, 2023) 

BEIJING, HONAIRA DEEPEN STRATEGIC COOPERATION 
Beijing and Honiara are deepening their "comprehensive strategic partnership," according to readouts of bilateral meetings in China. Solomon Islands Prime Minister Manasseh Sogavare traveled to Beijing in July to expand his nation's cooperation with China, specifically on matters of law enforcement and security. In return, according to a joint statement, "The Chinese side will continue to provide support and help to Solomon Islands as needed in strengthening Solomon Islands' police law enforcement capacity." Beijing's inroads into the Solomon Islands, as well as nearby Kiribati, complicate the strategic outlook for Australia, New Zealand, and other South Pacific nations. (NPR, July 11, 2023)