Dear reader,

In this newsletter: Western companies find themselves in hot water in China, Hungarian Defense Minister visits Hungary, Brussels and Washington align closer on China, Dukovany drama continues, and much more.  
 

Many western clothing companies, including H&M, Nike and Burberry have suddenly found themselves in hot water amidst a nationalistic backlash in China. The catalyst?—their stance on sourcing cotton from Xinjiang, where forced labor of Uyghurs and other predominantly Muslim minorities has become one of the cogs of the massive apparatus of oppression. The backlash came after the rounds of tit-for-tat sanctions between China and the EU, the US, Canada, and the United Kingdom over abuses in Xinjiang last month.

In its reaction to initial EU and US sanctions related to Xinjiang, China decided to up the ante by targeting not only EU officials but also researchers and NGOs. At the same time, it unleashed the nationalist sentiments targeting Western brands for their supposed complicity in blackening China’s image. While the outrage of the nationalist circles within the Chinese population is genuine, the role of the party apparatus in inflaming and directing outrage is pivotal. While no public disorder incidents were recorded (contrast this with the 2012 protests against Japan), the apparent erasure of H&M from the Chinese internet, including the removal of its stores from maps, attested to the scale of China’s appetite for retribution.

The episode makes the case for increased economic engagement with China, epitomized by the EU’s CAI agreement, on increasingly shaky footing. It is clear that despite the promises of fair treatment, access to the Chinese market can be weaponized at Beijing’s will. Moreover, the flare-up of tensions illustrates the tightrope western companies must walk to accommodate audiences in China and avoid domestic cries of hypocrisy.

A big test in this matter will be the upcoming Olympic Games in Beijing next year. While the pressure from the Western public opinion and politicians to withdraw sponsorship of the games will be immense, it may pale in comparison with the almost sure to a quick death it would mean for the companies’ future in China. The stakes for European companies heavily exposed to China are not small, by any means. As argued by one representative of the German car conglomerate: “Are we prepared to live with a Volkswagen that is half the size of what it is now? That is what this boils down to. That is the debate we need to have.”

• Chinese Defense Minister Wei Fenghe flew to Europe for an unexpected tour across Hungary, Serbia, Greece, and North Macedonia. While the visit was most likely planned well ahead, the timing appeared symbolic in light of the EU-China tensions. Wei’s mission was mostly political—to stress the importance of ties with the countries in the CEE region, just as the skepticism towards China reaches an all-time high. In Budapest, Wei used the opportunity to laud Hungary’s stance on Xinjiang sanctions, which were called by Hungarian Foreign Minister Szijjártó “harmful” and “pointless”. It appears that the vocal opposition to the sanctions served Hungary well, as Beijing apparently glossed over the fact that Hungary in fact voted affirmatively in the Council. Another prominent issue on the agenda was vaccine cooperation, as Hungary is still the only EU country using the Chinese Sinopharm vaccine, with another vaccine by CanSinoBIO approved for emergency use. Overall, the signal of the visit was clear—China and Hungary will continue to portray their partnership in an overwhelmingly positive light, each following their own interests vis-a-vis Brussels.

• The recent nasty flare-up of EU-China sanctions has one clear winner—the proponents of a closer Transatlantic relationship. The EU has long tried to carefully navigate the China issue, reluctant to see China squarely as a rival, which has become a virtual consensus in Washington. Now, when China overplayed its hand with sanctions, it appears there will be less daylight between Brussels and Washington on this crucial geopolitical issue from this point on. However, the road ahead will not be easy. Tensions remain on the issue of the Nord Stream 2 pipeline, which Germany is pursuing despite opposition both from Washington and other EU member states. Washington is weighing additional sanctions on companies involved in the project, which American State Secretary Blinken termed a “Russian geopolitical project intended to divide Europe and weaken European energy security.” A game-changer may come with a change in leadership after elections in Germany, where the Greens who are making gains in polls, made a pledge to stop the pipeline.

• Dukovany tug of war continues. Recently, Czechia has undergone a period of turbulent developments around the tender for nuclear power station 8. First, Deputy Prime Minister Karel Havlíček announced that he wants to approach the four main competitors, including Russia's Rosatom, with the so-called security review, but at the same time also share technical documentation of the tender, which would de facto mean a start of the competition. Based on subsequent pressure of the opposition, Prime Minister Andrej Babiš was pushed to initiate a meeting of the Security Council, which downplayed some of the concerns and reaffirmed the role of the security community within the tender's fundamental assessment. Concurrently, the Czech special envoy for nuclear energy Jaroslav Míl was fired for opposing the plan to include Rosatom in the competition, even if officially based on the absence of security clearance. The Czech Senate as well as the five opposition party leaders expressed their firm opposition to Russian and Chinese participation in the tender due to the serious threat that they present. What the future holds for the nuclear tender remains unclear, but the reputation of the Czech government, its transparency, and fairness of judgment were severely shaken. Many comparisons between the Czech and Hungarian situation with Paks-II, where Russia was directly contracted, were described by MapInfluenCE analyst Dominik Istrate in his new paper for the European Values think tank.

• Veronika Blablová wrote a piece for our sister project CHOICE, looking at how China and India compete over vaccine deliveries around the globe (read here).
• Ivana Karásková and Veronika Blablová authored a piece for The Diplomat, looking at the logic and practice of Chinese vaccine diplomacy (read here).
• Completing our vaccine diplomacy coverage, Pavel Havlíček explored how the Sputnik V vaccine has become a geopolitical tool for Russia in Slovakia, Hungary, and beyond for The Insider (read here).

• Alicja Bachulska coauthored a piece analyzing the recent results of opinion polls on Polish views of China for The Diplomat (read here).

• Alicja Bachulska joined a debate organized by CEPA to talk about China’s use of techno-authoritarianism (watch here).

• Genomes of 5,000 Poles may be sent to China to be sequenced by BGI, a Chinese company with alleged ties to the government and People’s Liberation Army (read here).

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