China Policy Monitor No. 1613

CHINA INVESTS $50 BILLION IN HAINAN'S MILITARY INFRASTRUCTURE
China has spent more than $50 billion turning farmland and commercial seaports on Hainan Island into military complexes to project power into the South China Sea. According to the U.S. Defense Department, the Greater Yulin Naval Base – the epicenter of China's naval presence – boasts an aircraft carrier dry dock, a carrier pier, and China's only ballistic-missile submarine base, assembled at a cost of more than $18 billion. "China is working very hard at having superiorities there that nobody else can match. They've built an ability to project power with multiple types of capabilities — air, missile, militia, ships, submarines," says retired Rear Admirl Michael Studeman, the former commander of the U.S. Office of Naval Intelligence. (Washington Post, October 31, 2024)

HUAWEI OBTAINS ADVANCED AI CHIPS DESPITE U.S. EXPORT CONTROLS
The U.S. government's web of controls and sanctions to prevent Chinese companies from buying or making cutting-edge computer chips has not stopped Huawei from obtaining them. The Huawei Ascend 910B processor contains multiple types of computer chips used for training AI models. Although Taiwan Semiconductor Manufacturing Corporation, a key chip supplier, has not directly sold its best chips to Huawei, it has supplied other Chinese companies that have subsequently transferred them to the PRC tech giant. "TSMC discovered about two weeks ago that chips that were shipped a specific customer in the past had ended up in the hands of Huawei," said a Taiwanese official. TSMC has stopped shipments, and informed both the U.S. and Taiwanese governments. (New York Times, October, 29 2024)

CHINA'S MILITARY USES META'S LLAMA TO BUILD AN AI MODEL
The Peoples Liberation Army is using Meta's publicly available Llama 13B large language model to develop its own AI tool called "ChatBIT" to gather and process intelligence. Chinese researchers incorporated their own parameters to construct an AI tool that is "optimised for dialogue and question-answering tasks in the military field," according to a paper by several PRC government researchers. "Through technological refinement, ChatBIT will not only be applied to intelligence analysis, but also strategic planning, simulation training and command decision-making will be explored." (Reuters, November 1, 2024)

CHINA TIGHTENS ITS GRIP ON RARE MINERALS NEEDED TO MAKE CHIPS
Beijing is making it harder for foreign companies, especially chip makers, to purchase rare earth metals and other minerals mined and refined in China. China already produces nearly all of the world's supply of these materials, and the new restrictions will only further solidify its market dominance. Last year, export controls were imposed by Beijing on gallium and germanium, and on September 15th, it restricted exports of antimony as well. All three are materials used in semiconductors. This month, exporters began to provide detailed reports on how rare earth metals are used in Western supply chains. The last two foreign-owned rare earth refineries in China are being acquired by state-owned companies. National security officials have labeled rare earth mining and refining as state secrets. (New York Times, October 26, 2024)

INDONESIA WANTS MORE HIGH-SPEED RAIL FINANCING FROM CHINA
A year after the opening of Indonesia's first high-speed railway connecting Jakarta to Bandung, the country is courting China's support for an extension of the line to Surabaya in East Java. The rail service, named Whoosh, attracted over 4 million passengers in its first year. During a rail expo in Shanghai in June, Indonesia pitched three major railway projects: a link between Whoosh and urban rail systems, an airport line in the future capital, Nusantara, and an urban railway connecting Nusantara to neighboring cities. "China offered to transfer technical knowledge to Indonesia without any condition or complicated requirements and they were persistent in their lobby efforts," said Fadlan Muzakki at Universitas Indonesia. (Voice of America, October 26, 2024)