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This year’s government work report contained no mention of economic cooperation with the US. Photo: AP

China’s diplomacy budget grows while trade deal outlook narrows

  • A modest increase in spending reverse 2 years of declines for the country’s diplomatic corps
  • But references to economic agreements with the US and EU have evaporated in this year’s government work report

Gone is any mention of economic cooperation with the United States and the European Union. Gone, too, is any reference to a trade with Japan and South Korea

Instead, this year’s government targets for diplomacy are largely limited to the Asia-Pacific trade agreement known as RCEP and China’s intercontinental Belt and Road Initiative.

But there was some good news for China’s diplomats, with moderate growth earmarked for diplomacy spending.

01:25

China aims for modest 5.5% GDP growth in 2022, citing economic pressures

China aims for modest 5.5% GDP growth in 2022, citing economic pressures

Delivering his annual work report to national legislators on Saturday, Premier Li Keqiang said the country faced “increasing risks” both at home and abroad.

Unlike the previous three years, he made no mention of trade deals with the US, EU, Japan and South Korea, saying only that “we will work to negotiate and conclude high-standard free trade agreements with more countries and regions”.

Relationships with each of those countries have declined, with a landmark EU investment agreement bogged down by sanctions and accusations of human rights abuses.

Trade talks with the US have also stalled since US President Joe Biden took office. Washington has accused Beijing of not fulfilling a phase one trade deal, and US tariffs on Chinese goods remain in place.

Meanwhile, the latest report has hailed the implementation of the Regional Comprehensive Economic Partnership, the world’s biggest free-trade agreement which came into effect at the start of this year.

How does China’s defence budget rise compare with spending elsewhere?

Pang Zhongying, an international affairs expert at the Ocean University, said there were too many geopolitical uncertainties to lay any plan for unrealised deals.

“It has been obvious that China’s differences with the EU and the US have become more apparent. Other countries’ sanctions towards Russia in response to what is happening in Ukraine will also affect China and bring uncertainties as to how they can have economic cooperation under such developments,” Pang said.

Lu Xiang, a US-China scholar at the Chinese Academy of Social Sciences, said cutting all mention of these unconfirmed trade deals reflected caution on China’s part.

“In the face of these complex changes in geopolitics, the overall stance the country has is to get hold of what is already established and confirmed, and to consolidate them, instead of focusing on things that are still under discussion,” Lu said.

While the references to external risks were vague they were noted in the section that addressed the Belt and Road Initiative, China’s effort to expand its global influence through billions of US dollars in investment and loans in infrastructure abroad. The coronavirus pandemic and the increased security risks in some countries have also hindered the progress of many Chinese projects in the past two years.

“We will carry out outbound investment and international cooperation in a well-regulated way, and effectively guard against overseas risks,” the report said.

Ukraine, however, was not noted.

Lu said that while top leaders must have considered the risks involved in the conflict in Ukraine, it would not be expected to be addressed in the document.

“They must have taken consideration, but have refrained from making any public statements on the situation as it could easily stimulate the volatile environment. The key of the report is domestic policies anyway,” Lu said.

02:30

Xi meets with Putin ahead of Beijing Winter Olympics opening ceremony

Xi meets with Putin ahead of Beijing Winter Olympics opening ceremony

In the annual budget released by the Ministry of Finance on Saturday, spending on diplomacy will increase 2.4 per cent to 50.27 billion yuan (US$7.95 billion), reversing the previous two years of shrinking diplomatic budgets.

The budget cut to diplomacy spending last year was 1.9 per cent, after a big slash in the year 2020 which amounted to a 11.8 per cent budget cut.

While it is unclear what the diplomacy budget includes, the highest budget on diplomacy spent in recent years was in 2019, when the budget was boosted to 62.71 billion yuan.

Pang, from Ocean University, said the increase could just be an inflation adjustment following the coronavirus pandemic, and also an increase in spending for China’s embassies overseas which have been ramping up sales and donation of Chinese vaccines.

Lu, from CASS, said the budget cut in the last two years made sense given the limits on overseas visits and meetings brought about in response to the pandemic and the overall economic slowdown.

“Whether this growth in budget indicates a possibility of relaxing the border controls in the later half of the year is still unclear,” Lu said.

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